Social Security is guaranteed income for life. When you start collecting affects how much you will receive. It is a very important, and very personal, decision. You should base your decision about when to collect on your personal needs, preferences, and financial situation, and factor those benefits into your overall retirement income plan.

4 factors that affect your monthly payments

Below we've outlined four key factors to consider when you're facing this decision.

Age and longevity
Taxes
Collecting while you're still working
You and your spouse

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1.) Age and longevity

You can start collecting individual retirement benefits anytime between 62 and 70. However, you'll collect different amounts if you start receiving your benefits before, on, or after your Full Retirement Age (FRA). Your Full Retirement Age is based on the year you were born. It is determined by the Social Security Administration (SSA).

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Remember: once you start taking payments, they are subject to annual cost of living increases. So the larger your payments are when you start, the larger your annual overall cash increase will be.

• If you claim before your FRA, you’ll collect reduced benefits
  If you start collecting benefits at age 62, you will not receive 100% of the benefits you would collect if you waited until your FRA.
  
  Example: say your benefits are $1,350/month at 62 and your FRA is 66. Waiting four more years increases them by $450 a month ($5,400 a year).²
• If you claim at your FRA, you'll collect full benefits
  At your Full Retirement Age (FRA), you're eligible to collect your full individual retirement benefits.

If you claim after your FRA, you'll collect higher benefits For every year you put off your benefits until you're 70, you could receive up to 8% more in future monthly payments. Once you reach 70, these increases stop. So there is no benefit for you to wait any longer.

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Example: say your benefits are $1,800/month at your FRA. You'll receive $2,376 a month if you delay claiming until you're 70. That's $576/month more than at your FRA (and $1,026/month more than at 62).²

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2.) Taxes

You may have to pay federal taxes on a portion of your benefits if you file as an individual with over $25,000 in total income or if you file jointly with a combined total over $32,000.³ See the chart below for more details. Remember: income includes money from all sources – employment, dividends, capital gains, distributions, etc.

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3.) Collecting while you're still working

You can work while you collect. But if you take Social Security before your FRA and earn more than the annual limit ($13,560 for 2008), your payments could be reduced even more. Once you reach your FRA, you can earn as much as you like without having your benefits reduced.

Note: There are times when working and putting off your benefits may make sense. For example, if you put them off and then earn more than you have in any previous years, the Social Security Administration may raise your base earnings. This could increase your overall benefit payments when you start collecting.

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4.) You and your spouse

Married couples have more choices to consider when it comes to Social Security. A lower-earning spouse could be eligible for up to 50% of the higher-earning spouse's benefits. When the higher wage earner begins taking benefits it may impact his or her spouse's benefit and survivor benefit.

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Review the chart for more details.

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See some strategies you need to consider – before you start taking them.

See the official Social Security Administration (SSA) website for full details about your retirement benefits.

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