hello and welcome to the understanding social security video series I'm Social Security guy this video series is designed to educate you on most facets of the program watch the videos in any order you like enjoy and if you have time please provide us your feedback hello Social Security guy here with the look at the question of when to retire and collect Social Security benefits if you are among the 96% of workers who are covered under Social Security it is important to understand the rules defining your benefits so let's get started would it be better for you to begin receiving benefits early with a smaller monthly amount or wait for a larger monthly amount later that you may not receive as long the answer is highly personal and depends on a number of factors such as your current cash needs your health and family longevity whether you plan to work in retirement whether you have other retirement income sources your anticipated future financial needs and obligations and of course the amount of your future social security benefit we hope you will weigh all of the facts carefully and consider your own circumstances before making the important decision about when to begin receiving Social Security benefits if you live to the average life expectancy for someone your age you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62 full retirement age age 70 or any age in between however monthly benefit amounts can differ substantially based on your retirement age basically you can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of time the amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life though you do receive annual cost of living adjustments and depending on your work history may receive higher benefits if you continue to work when considering how long you will live keep in mind these odds if you are married and both age 62 there is a 40% chance one of you will live to age 90 this chart provides an example of how your monthly benefit amount can differ based on the age at which you decide to start receiving benefits let's say your full retirement age is 66 and your monthly benefit starting at that age is $11,000 if you choose to start getting benefits at age 62 your monthly benefit will be reduced by 20 25% to $750 to account for the longer period of time you will receive benefits this is generally a permanent reduction in your monthly benefit if you choose to not receive benefits until age 70 you would increase your monthly benefit amount to $1,320 this increase is from delayed retirement credits you get for your decision to postpone receiving benefits past your full retirement age the benefit amount at age 70 in this example is 32% more than you would receive per month if you chose to start getting benefits at full retirement age why do some experts say you will only need 75% of your current income to maintain your standard of living because things that you used to have to pay will go away like payroll taxes income taxes saving for retirement and maybe the mortgage let's start with the basics to be eligible for Social Security you need to have 40 credits depending on how much you get paid you can earn up to four credits per year which means that most people need 10 years of work to qualify for social security benefits in 2011 you will earn one credit for each $1,120 of earnings this amount increases slightly each year as average earnings increase people people who were born prior to 1929 need fewer than 40 credits you only need 39 credits if born in 1928 and 38 credits if born in 1927 the benefit that you ultimately receive from Social Security will be a percentage of your average lifetime earnings lower income workers will receive a higher percentage of their lifetime earnings a worker with average earnings can expect to replace about 40% of his or her average lifetime earnings this benefit is intended to supplement your savings your Investments your pensions and any other insurance plans you might have in place if you were born in 1942 or earlier you are already eligible for your full social security benefit if you were born from 1943 to 1960 the age at which full retirement benefits are payable increases gradually to age 67 use this chart to determine your full retirement age the taxes you have paid into the Social Security System pay for three kinds of benefits retirement disability and survivors now if you are eligible for retirement or disability benefits it's important to remember that other members of your family might be able to benefit as well for instance your spouse May benefit if 62 or older he or she may still benefit if younger than 62 and caring for a child under 16 and that child may be 16 or older if they are disabled also your children can benefit if they are unmarried and under 18 they can be 18 or 19 if attending Elementary or high school full-time they can also be 18 and older if they are disabled also if you're divorced your ex spouse could be eligible for benefits on your record you can continue to work and still receive retirement benefits your earnings in or after the month you reach your full retirement age will not reduce your Social Security benefits however your benefits will be reduced if your earnings exceed certain limits for the months before you reach full retirement age here's how works if you are younger than full retirement age $1 in benefits will be deducted for each $2 in earnings you have above the annual limit in the year you reach your full retirement age your benefits will be reduced $1 for every $3 you earn over an annual limit until the month you reach full retirement age once you reach full retirement age you can keep working and your Social Security Ben benefit will not be reduced no matter how much you earn if during the year your earnings are higher or lower than you estimated let Social Security know as soon as possible so that they can adjust your benefits and also please watch my video on this important topic about onethird of people who get Social Security have to pay income taxes on their benefits if you file a federal tax return as an individual and your combined income is between 25 and $34,000 you may have to pay taxes on 50% of your Social Security benefits if your combined income is more than $34,000 up to 85% of your Social Security benefits is subject to income tax if you file a joint return you may have to pay taxes on 50% of your benefits if you and your spouse have a combin comined income that is between 32 and $444,000 if your combined income is more than $44,000 up to 85% of your Social Security benefits is subject to income tax if you are married and file a separate return you probably will pay taxes on your benefits at the end of each year Social Security will mail you a social security benefits statement showing the amount amount of benefits you received you can use this statement when you complete your federal income tax return to find out if you have to pay taxes on your benefits if after watching this video you have more questions about retirement income planning give me a call at my Villanova office we can run a retirement income analysis for you have a great day