When to Collect Social Security: Why You Should Wait

When to Collect Social Security: Why You Should Wait

Withheld benefits are not lost forever, however. At the beneficiary’s full retirement age, Social Security will adjust the monthly benefit upward to account for the withheld benefits. The beneficiary will continue to receive the higher payment even after she recoups the withheld benefits, which could take 12 years.

This is how it works: Say a person is eligible for a benefit of $24,000 a year at full retirement age but claims at 62 and gets a reduced benefit of $16,800. If the beneficiary earns $25,000, the government will withhold $3,020 for the year, which is half of the earnings above the limit. At full retirement age, the beneficiary will continue to receive the reduced benefit of $16,800 but eventually will get the withheld money back in the former of a higher benefit.

James Blair, the lead consultant with Premier Social Security Consulting in Cincinnati, said he advises working clients to balance the Social Security income they will receive by claiming early with the permanent reduction in benefits.

“If Social Security is withholding two or three checks, they will get paid for the majority of the year,” said Mr. Blair, a former Social Security administrator. “If they’re only getting two or three checks, it usually is better to wait to claim.”

Two rules could reduce benefits for people who are also entitled to a public pension on earnings not covered by Social Security.

One rule is the “windfall elimination provision” (known as the W.E.P.), which applies to people who worked at jobs covered by Social Security but also worked as noncovered government employees and are due a pension.

When it is time to claim benefits, many people are unprepared for these cuts, Mr. Blair said. Possible W.E.P.-related reductions are not reflected in the worker’s Social Security statement, which shows the history of annual earnings and estimates of future benefits only for jobs covered by Social Security.

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