Dear Rusty: I am 64 years old and having difficulty working due to my arthritis, but I can continue part time as a podiatrist. I do not know the best way to determine when to retire. What is the formula or a way to determine which is a better choice? Signed: Undecided

Dear Undecided: There is a difference between deciding when to retire from working and deciding when to claim your Social Security benefits. For the former, you should consult with a certified financial advisor, but I’ll provide you with how Social Security fits into your personal circumstances. In deciding when to claim Social Security, you should look at your financial needs, your life expectancy, your work status, and your marital status. There is no one formula right for everyone because everyone’s circumstances are different, but here are some things to help decide what is right for you:

• Social Security has an “earnings test” which applies to anyone who collects Social Security before reaching their full retirement age (FRA). Your FRA is 66 years and 8 months, and that is the point at which you get 100% of the SS benefit earned from a lifetime of working. If you collect SS before your FRA and continue to work, there is a limit to how much you can earn without jeopardizing your benefits. For example, the earnings limit for 2023 is $21,240 and, if that is exceeded, SS will take away benefits equal to $1 for every $2 you are over the limit. They “take away” benefits by withholding future payments until they recover the penalty for exceeding the limit. If your earnings are substantially over the limit, you will be ineligible to collect Social Security until either your earnings are less, or you reach your FRA. 

• If you claim SS before your FRA your benefit amount will be permanently reduced. If, for example, you claim SS to start at age 65 your monthly benefit will be about 89% of what it would be at your FRA. That reduced benefit would not change thereafter except for Cost of Living Adjustments (COLA) usually granted annually.

• If Social Security will be a major part of your retirement income, then waiting to get a higher monthly benefit may be a prudent strategy for you. The longer you wait to claim the more your benefit will be. Your SS benefit will continue to grow until you are 70 years old, and at 70 your monthly benefit will be about 27% more than it would be at your FRA. Your maximum SS benefit will be attained at age 70 but waiting until age 70 to claim is only prudent if you anticipate a long life expectancy.

• Life expectancy is a very important factor in deciding when to claim SS. If you claim at age 70 instead of at your FRA, you will need to live until you are about 83 to break even moneywise. If you live even longer than that, then waiting until 70 will yield the highest monthly amount and the most in cumulative lifetime benefits. But if your anticipated life expectancy is less, claiming earlier may be a better choice. 

• If you are married and expect your wife to survive you, consider that the benefit your wife can get as your widow will be based on your SS benefit when you die, thus the longer you wait to claim the more your wife’s benefit as your widow may be. If you predecease your wife, her benefit will be based on the amount you were receiving at your death if that is more than her personally earned SS benefit.

So, as you can see, deciding when to claim Social Security is a decision to be made after carefully evaluating your personal circumstances as described above. I hope this provides what you need to make an informed decision, but if you have further questions, please contact us at SSAdvisor@amacfoundation.org, or at 888-750-2622.

Russell Gloor is an Association of Mature American Citizens certified social security advisor.  To submit a question, visit amacfoundation.org/programs/social-security-advisoryor email ssadvisor@amacfoundation.org.