Social Security reports that collecting retirement benefits early or late will give the retiree approximately the same total over his lifetime. Whether you receive a smaller amount for more years or a larger amount for fewer years is your choice. Social Security imposes a penalty on early retirees for years that their other income goes over a certain threshold. This figure changes, but starts at $14,160 in 2011.
Full Retirement Age
Full retirement age is 66 for most individuals anticipating retirement in 2011. Those born between 1943 and 1954 reach full retirement age at 66. If you wait until full retirement age to collect your Social Security benefits, you get the full benefit with no penalty.
Social Security permits early retirement at age 62, but during the years between early retirement and full retirement age you may incur penalties for income in excess of the threshold. In years prior to the year you reach full retirement age, the penalty in 2011 is $1 for every $2 you make in excess of $14,160. For the year you reach full retirement age, you may earn $37,680. The penalty for that single year is $1 for every $3 you make in excess of $37,680. Only earned income counts in the total, and if you are self-employed, only your net income counts for the calculation.
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If you receive a penalty as a result of early retirement and earned income over the limit, Social Security recalculates your monthly benefit at full retirement age to add in the months you received a penalty. You may see a slight increase in your Social Security benefits after you reach full retirement age. Social Security automatically makes this calculation if you have incurred a penalty year in your early retirement.
If you choose to retire at or after your full retirement age, you can collect your full Social Security retirement benefits and earn any amount of income without penalty. The penalty stops the month you reach full retirement age. A delay of Social Security benefits allows accrual of a larger monthly payment. You receive about 30 percent more at age 70 than you receive at 66. You receive about 25 percent less in monthly benefits at age 62 than at age 66.
If your spouse wants to collect Social Security based on your work history, you can file for benefits at full retirement age and suspend collecting your Social Security until you are ready. This allows a spouse to collect early retirement or Social Security benefits at her full retirement age. Social Security must approve you for benefits for a spouse to collect on your work history, but you can wait to collect until you are 70 if you choose. Age 69 is the last year Social Security adds to your benefits, so there is no advantage to wait past 70 to collect your retirement benefits.