1) I should start taking Social Security benefits as soon as I'm eligible.
This sounds good on the surface, but to max out your benefits, you need to dig a little deeper. Yes, you may be eligible to start collecting Social Security at age 62, but your benefit will be permanently reduced. Wait until what the SSA calls your "full retirement age" or FRA (66 if you were born between 1943 and 1954), and you'll get a larger monthly benefit. Plus, benefits increase by 8 percent for every year you wait to collect between your FRA and age 70. That's an extraordinary risk-free return in this interest rate environment! Benefits do max out at 70, so don't wait longer than that.
2) It's always best to wait as long as possible before taking benefits.
This is the flip side of number one. And while it generally makes financial sense to wait to collect benefits, it depends on your situation -- and your expected longevity. If you collect early, you get a smaller payment for a longer time period. Collect later and you get a larger payment for a shorter time period. So you have to do the math and consider your options. Also note that a spousal benefit doesn't increase past your full retirement age. So if you're collecting on your spouse's earnings record, take it at your FRA.
3) I'm not eligible for Social Security if I'm still working.
Yes, you are -- but with some strings attached depending on your age. If you file at age 62, in 2013 $1 in benefits is withheld for every $2 you earn above $15,120. The year you reach your FRA, $1 is deducted for every $3 you earn above a higher limit, currently $40,080. But this reduction is temporary, similar to withholding. At your FRA, your benefit is recalculated and you'll get the money back in the form of a higher monthly payment. Once you reach your FRA, there's no reduction.
4) If my spouse earns more than I do, I should take the spousal benefit.
The spousal benefit can be a real boost for a nonworking or low-earning spouse. But remember, it's only 50 percent of the higher-earning spouse's benefit. Once you file, the SSA will automatically give you the larger of either the spousal benefit or your own benefit.
5) Once I marry, I'll always be able to collect based on my spouse's record.
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