NEW YORK (MainStreet) The decision of when to begin receiving Social Security benefits age 62, age 66, or age 70 is not an easy one. It involves many variables, much thought, and several detailed calculations.
It is important to understand the difference between Social Security and most other types of retirement accounts.
Social Security benefits are, to a degree, infinite. They continue until you die. Then, if applicable, they continue for any surviving spouse until the spouse passes. You could live to be 137 years old, and each and every month you would receive a full Social Security check.
But if you are single and begin to collect benefits on July 1, and drop dead on July 2, all the contributions you have made to Social Security over your lifetime are lost forever. Your beneficiaries receive nothing.
The value of your Social Security account does not generate "earnings." Your distributions are increased annually based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Distributions from Social Security do not reduce the "value" of your Social Security "account." Except for the consideration of your age when benefits begin, current Social Security distributions do not reduce potential future distributions.
The maximum amount of Social Security benefits that are subject to federal income tax is 85%. The taxable amount could be less. In 27 states, 100% of Social Security benefits are exempt from state income tax.