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The average monthly payment across all Social Security recipients is about $1,900. But, what you earn could be much more (up to $4,500) or much less. What YOU will earn is based on how much you paid into Social Security via your payroll taxes (FICA).
If you only worked 10 years, you qualify for benefits, but they will be low. If you worked at a high-paying job, you paid more into the system therefore you’ll get more out. Social Security calculates how much you will receive by taking your highest 35 years of earnings and indexing them for inflation.
There is no need to guess what you’ll get paid. Go to www.ssa.gov and set up a free account today. It will show you all your earnings. If you see years with a $0 and you know you worked, you have a problem. You’ll need your tax returns and an appointment with SSA to fix it. By setting up your account, you can see an ESTIMATE of what you’ll earn at your full retirement age. THIS IS AN ESTIMATE. It’s based on you working up to your full retirement age (most people won’t) and you continuing to earn the same amount of money until you retire. If you retire early, you get the double whammy of a permanent reduction for drawing early AND since you stopped working a few years early, you lowered the pot of money to draw from.
Since many women will earn more by taking their spousal benefits rather than drawing from their own Social Security pot of money, they wait until their spouse retires and then they file too. But others prefer to take their Social Security at the EARLIEST they can, which is age 62. Many women choose to take their own, lower benefits and wait until their higher-earning spouse retires. When the spouse retires, she can then switch benefits if ½ of his amount is greater than her own benefit.
Here is the catch: if you take benefits early, you are locked in a permanent reduction. When you later switch up to your higher spousal benefit, that original cut follows you. This means that you’ll never get the full 50% of your spousal benefit, even though you didn’t draw off your spouse until your full retirement age because you started your OWN benefits at age 62.
Before you decide it’s better to wait and draw than take a reduced benefit, keep this in mind. It’s all a gamble. You don’t know when you’ll die. If you end up living a long time, you’ll wish you had waited a few years to start Social Security to have a few extra hundred dollars in your monthly check. But if you die in your 70’s, you’ll have made the right choice to draw early.
No one knows when the best time to draw is, but you have some indication of your life expectancy (how healthy are you now, how long your parents live, are you in a high-risk area or job, how well you take care of yourself, and how active are you are all questions you must ask yourself. No financial planner can give you those answers. It’s a personal decision, unique to each person’s circumstances.
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