For most Americans, Social Security continues to serve as an essential part of their retirement income, even though it rarely provides the full amount needed to maintain one’s lifestyle. When planning for retirement, deciding when to begin collecting Social Security benefits is one of the most important choices you will make. Whether you start early, at full retirement age, or later, that decision can significantly influence your long-term financial security. To help you make an informed decision, the Indiana estate planning attorneys at Frank & Kraft explain how the timing of your retirement impacts your Social Security benefits.
Understanding the Social Security Retirement System
The Social Security program was established in 1935 to provide financial support to retired workers. During your career, you contribute to the system through payroll deductions known as the Federal Insurance Contributions Act (FICA). These contributions help fund your future retirement benefits. To qualify for payments, you must earn a certain number of credits during your working years. Credits are based on your income, and the required dollar amount for each credit changes periodically to reflect inflation. For 2025, you earn one credit for every $1,810 in wages or self-employment income, up to four credits per year. Once earned, these credits remain on your record permanently. Anyone born after 1929 must accumulate 40 credits, the equivalent of roughly ten years of work, to qualify for retirement benefits. You may choose to begin collecting benefits as early as age 62 or as late as age 70, depending on your needs and goals.
Determining Your Benefit Amount
The amount you receive each month depends on several factors, including your total earnings history and the age at which you start drawing benefits. The Social Security Administration (SSA) calculates your benefit using your highest 35 years of earnings, adjusted for inflation. To review your personal benefit estimate, you can visit the SSA’s website to create an online account. Through this account, you can view your full earnings record, verify the credits you have earned, and estimate your monthly payments based on different retirement ages. You can also call the SSA at 800-772-1213 to request a statement using form SSA-7004. This document provides a clear picture of your potential benefits and helps you plan your retirement timeline effectively.
The Impact of Retiring Early
The full retirement age (FRA) for most people today is 67. If you choose to begin collecting benefits before that age, your monthly amount will be permanently reduced by five-ninths of one percent for each month you retire early, up to 36 months. If you retire more than 36 months before your FRA, the reduction continues at five-twelfths of one percent for each additional month. For instance, if you start receiving benefits at age 62, which is five years early, your monthly payments will be reduced by approximately 30 percent. This reduction continues for the remainder of your life. While early retirement allows you to begin collecting income sooner, it also means receiving smaller payments over time. This decision can make sense for individuals in poor health or those who need income immediately, but it may not be ideal if you expect to live well into your 80s or 90s.
The Benefits of Delaying Retirement
Waiting beyond your full retirement age can significantly increase your monthly benefit. Social Security rewards delayed retirement with “delayed retirement credits.” For each year you postpone collecting benefits beyond your FRA, up to age 70, your payments increase by a set percentage, currently about eight percent per year for most workers. This means that someone who waits until 70 to begin collecting could receive up to 24 percent more per month than if they retired at 67 and more than twice as much as someone who retired at 62.
This increase can provide a substantial advantage, particularly if you have other income sources that allow you to delay Social Security. The longer you wait, the greater your lifetime benefit will likely be, especially if you live past the average life expectancy. Delaying benefits also provides a form of inflation protection, since your higher payments will be subject to future cost-of-living adjustments.
Do You Have Additional Questions about Social Security Retirement Benefits?
For more information, please join us for an upcoming FREE seminar. If you have additional questions about how your Social Security retirement benefits fit into your Indiana estate plan, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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