By TEDDYE SNELL
When most people think of retirement, they envision a life of leisure and comfort, and the money to ensure it.
But Cherokee County residents considering retirement may be interested to learn they could earn more by delaying collecting Social Security benefits.
According to the National Academy for Social Insurance, 11.8 percent of the county’s population is aged 55-64 – the time when many start thinking about retirement. Workers can start drawing Social Security at age 62, but for those who can wait, the benefits go up.
John Yeutter, associate professor of accounting at Northeastern State University and Certified Financial Planner, said drawing Social Security early results in a reduction in benefits.
“The person [who draws Social Security at age 62] would receive 75 percent of [his or her] normal benefit,” said Yeutter. “Also, a person cannot draw Social Security between 62 and 65 and continue to work. The benefit is reduced if the person receives more than about $15,000 per year.”
Yeutter indicated full retirement age for people born between 1943 and 1954 is 66.
“Delaying benefits after age 66 will increase them 8 percent for each year of delay, up to age 70, when the person would receive 132 percent of his normal benefit.”
Data from the Social Security Administration indicates that about only one in four Oklahoma residents who are currently receiving Social Security retirement benefits waited until full retirement age to start receiving payments.
In Cherokee County, 6,035 residents received retirement benefits from the federal system, according to 2012 figures.
The average recipient of Social Security benefits in Cherokee County received $1,097 a month in December 2012, which, on an annual basis, translates to $79,452,000 in income to the area, according to the Bureau of Economic Analysis.
But residents in rural areas like Cherokee County may have a harder time delaying their retirement.
“In rural areas, there is often a challenge as folks move toward retirement,” said Deanna Sharpe, personal finance professor at the University of Missouri. “They are more likely to face unemployment. Jobs are not as available. And when they are, they tend to pay less.”
Economic downturns can also affect when people decide to start receiving Social Security, Sharpe said.
“One of the coping mechanisms during the recent recession was to pick up Social Security at age 62, even if they might not have planned to do that before the recession.”
Yeutter said that providing the prospective retiree does not need the money to live on, delaying benefits could be a boon.
“For a single person, it is easy to compare the flow of payments beginning at age 65, and that from delaying, and find how long he must live to make it worthwhile,” said Yeutter. “For married couples, it is different. You can receive either your own benefit, or 50 percent of your spouse’s. You can only do this if your spouse has filed for [his or her] own benefit.”
Yeutter said this has led to “claiming strategies.”
“This is where the higher earner will ‘file and suspend,’ so the lower-earning spouse can begin receiving half his benefit,” said Yeutter. “Then, the higher earner waits until age 70 to begin receiving a higher benefit.”
According to AARP, the “file and suspend” rule was added to Social Security in 2000 as part of the Senior Citizens Freedom to Work Act to help couples plan their retirements.
“The most recent budget proposal seeks to limit this strategy because it is particularly beneficial to high income earners,” said Yeutter.
Yeutter also pointed out that Social Security is subject to taxation.
“Taxation of Social Security is somewhat complex,” said Yeutter. “For those with high income in retirement, 85 percent of their benefit is taxed. For those with low income, their benefit is excluded from tax.”
CHECK IT OUT
The Social Security Administration offers a calculator on its website, ssa.gov, that allows workers to estimate their retirement earnings based on their own work records and estimated retirement age.