Back to Basics: Timing Your Social Security Benefits, Part 2

September 13, 2016
DMD Staff

Social Security benefits are an entitlement for workers, but the amount and impact of the benefit could depend on a number of factors.

In

Part 1

, we looked at when dentists can begin to collect Social Security. But just because you can do something doesn’t mean you should. For dentists, who tend to earn more in later parts of their career, waiting as long as possible to collect benefits might be your best move. If you don’t experience the factors that make it necessary to collect benefits early, the factors to consider become different. Let’s take a look.

When should you start claiming benefits?

This a very personal decision. Although most dentists don’t find themselves in this situation, if you are having trouble meeting basic expenses as your career winds down, you may not be in position to wait until age 70 to claim benefits. Although your benefit amount will be reduced, you will receive benefits sooner and you will receive more payments—if not more money—over your lifetime.

Waiting, if it’s feasible for you, can make a big difference. An example cited by the Social Security Administration (SSA) goes like this: If you are eligible to receive a $1,000 per month benefit at full retirement age (which, again, depends on the year you were born), you will receive only $750 per month if you claim benefits at age 62. However, if you wait until age 70 to claim benefits, that monthly payment increases to a little more than $1,300.

What else should factor into your decision?

Health status, of course, may play a big role in your decision. A family history of excellent health and longevity is no guarantee that you’ll experience the same, but if you’re in generally good health and expect to be around to see great-great-grandchildren, factor that into your timeframe for collecting benefits. Consider also what level of benefits your spouse or partner will be entitled to. Working spouses who paid into Social Security will likely have earned their own benefit, but even if your spouse didn’t work, he or she can get up to one half of your benefit amount. Keep in mind that upon the death of your spouse, you will continue to receive the larger of your benefit or your late spouse’s—but not both.

Unlike unemployment, you can continue to work or rejoin the workforce and still receive your benefit, although you need to look into the various income and tax factors you’ll need to know. Consult an advisor or a tax attorney, who can go over your situation and make some recommendations.

And, (although it may seem strange to be taxed on income that is raise through a tax you previously paid), yes, as much as 85% of any Social Security benefit you receive may be taxable. That income will be added to any other income you earn to establish your total tax liability. Be aware that collecting benefits could, in some situations, push you into a higher tax bracket than you would otherwise occupy.

This can obviously complicate things, so schedule some time with a retirement plan advisor to go over your status, your goals, your planned retirement date and your decision on when to collect benefits.

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