The earlier you begin to receive your benefits, the smaller the annual amount you receive. If you’re not working when you turn 62, and Social Security income would help cover your living expenses, you may want to start collecting. If you were born after 1954, you’ll be eligible for a gradually decreasing percentage of the amount you would receive if you were 66, which is your full retirement age (FRA). For those born in 1960 and later, it is 70%. That reduction is permanent.
When you reach your FRA, which is scheduled to increase gradually to 67 for people born between 1955 and 1960, you are eligible for your full benefit. For each of the years you wait past your FRA and before you turn 70, you get an 8% credit.
You can estimate your Social Security income at any age by going to ssa.gov/estimator and following the directions.
You don’t get your benefits automatically. You have to apply to the SSA, and the time to begin is in the year before you plan to retire or take benefits. One reason to plan ahead is that you may be able to adjust your start date and increase the overall amount of your benefits.
You may have to pay tax on part of your Social Security benefits, reducing the amount you’ll have available to live on. That happens when your total income for the year, including half your Social Security payment, is more than the levels set by Congress.
What’s perhaps surprising is that you might find yourself in this situation even if your income seems modest. That’s because the income limits are relatively low and practically all of your income is counted, even earnings on tax-exempt investments.
If you’re single and your income is between $25,000 and $34,000, you must include 50% of your benefit in your taxable income, and if your income is over $34,000, you must include 85%.
If you’re married and filing a joint return, the income levels are slightly higher. If your income is between $32,000 and $44,000, you must include 50% of your benefit in your taxable income. If it’s over $44,000, you must include 85%. If you’re married but file separate returns, you must always include 85% of your benefit in your taxable income, regardless of income.