As FRS Special Risk participants, you tend to retire quite a bit earlier than the general public. But what does that mean for your Social Security retirement benefits? Should you take those benefits early as well, or should you wait until full retirement age—or even later? What are the potential pitfalls you need to be aware of? What do you need to be thinking about when it comes to making the best choices around YOUR Social Security retirement benefits?

We see FRS Special Risk participants work their whole careers building their retirement benefits and focusing on best practices and strategies in the latter part of that career to optimize those benefits that you get through the FRS pension or investment plan. But we’ll rarely see much effort at all spent on optimizing their Social Security retirement benefits. And that’s a mistake because we’re talking about a set of benefits that could quite easily be worth well over a million dollars. That deserves a little looking into!

There are steps that you can take that will go a long way toward helping you maximize your Social Security retirement benefits. Let’s look at some of the strategies people use to help boost their retirement benefits.

Social Security calculates your benefit amount based on the average of your 35 highest-earning years. So, if you work for something less than 35 years, those zeroes are averaged in, bringing your benefit level down a bit. Now, I know it’s possibly a stretch, especially in your career where 25 or 30 years can really take a toll on your body, but for some of you who might be close, just knowing that bit of information could make a difference.

There are maximum benefits, however. In 2024, for those taking retirement benefits as early as possible, which is age 62, the maximum benefit is $2,710/month. For those retiring at full retirement age, which is age 67 if you were born in 1960 or later, that benefit is $3,822 a month. And for those delaying benefits as far out as possible, or age 70, it’s $4,873.

Want to know the most common age people start taking Social Security retirement benefits? It’s 62—the earliest age possible. Why? Probably because they can. But that doesn’t mean they did it right. At age 62, your benefit level has been reduced by 30 percent if you were born in 1960 or later—and it will always be lower going forward than if you had waited until full retirement age.

So, a big part of deciding if you should take benefits earlier rather than later is built around how long do you think you’ll live? The longer that is, the more influence it’ll have on deciding to wait it out a bit before you start collecting. So, how’s your blood pressure, cholesterol, weight, and other health markers? How long did your parents and other close relatives live? If you think you may have an above-average life expectancy, then waiting to start your Social Security benefits may be best for you. And for each year beyond age 67, or full retirement age, that you wait to start collecting benefits increases your benefits by 8% per year. That’s a lot!

Doing a break-even analysis could help you decide. At what age will you start coming out ahead based on starting at a younger age vs. an older age? If you start at age 62 and your benefit level is reduced by 30% versus starting at age 67, then sometime around 80 or 81 you will have collected more from Social Security by waiting.

However, another point to consider is if you start taking benefits earlier and put that money to work in a robust investment program, you could push that break-even year out—quite some time depending on how well the investment program does. Which, of course, is not a given. But it is something to consider.

If you’re getting Social Security retirement benefits, some members of your family may also qualify to receive benefits on your record. If they qualify, your spouse, ex-spouse, or child may receive a monthly payment of up to one-half of your retirement benefit amount. These Social Security payments to family members don’t decrease the amount of your retirement benefit.

If you have a spouse who didn’t work at a paid job or doesn’t have enough credits to apply for Social Security or whose benefit is less than half of yours, they may qualify for up to half of your benefits each month once they are full retirement age. They can take that spousal benefit as early as age 62, but it will be reduced, just as yours would if you started benefits early.

In addition to that, your dependent children may be eligible for up to half of your benefit. To receive benefits, they must be unmarried and either under age 18—or 19 if they are still a full-time high school student—or if they are 18 or older and have a qualifying disability that began before the age of 22.

One thing you do need to be aware of, if you are considering starting your Social Security retirement benefits at any age less than your full retirement age, is other earnings or wages, not counting your pension or any money you withdraw from your investment plan. Because Social Security will decrease your benefit by $1 for every $2 you earn above certain limits. In 2024, that limit is just $22,320 per year. Again, this is just if you are taking benefits and are less than full retirement age. In the year you are turning full retirement age, but you’re still more than a month away from your birthday, then the limit is $59,520, and they decrease your benefit by $1 for every $3 you earn—gets a little tricky, so be careful. Bottom line is, if you have employment after you leave FRS, you’ll definitely want to consider that before you start taking benefits.

So, as you see, the decision around when to begin taking your Social Security benefits has quite a few variables to consider. Your health and expectations around life expectancy, your spouse and children, other earnings, and even how astute an investor you are all impact the decision. There’s a good pamphlet from the Social Security Administration that has good information to consider—I’ll put a link to it here. And if you want to talk to a qualified advisor about it all, and one who isn’t going to try and sell you an annuity or life insurance policy, give us a call here at Northstar. We’re financial planners who are full fiduciaries and investment managers, and we don’t sell any financial products—so no worries. All you get from us is sound advice you can use.

Hey, thanks for watching, and thanks for what you do every day for the rest of us—and stay safe out there!