American citizens living in Israel can claim Social Security benefits if they put enough “quarters” into the system. At what age should American-Israelis claim Social Security?
Waiting may be worthwhile
The youngest age to claim Social Security is 62. While retiring early and claiming benefits may seem tempting, the monthly payments received at age 62 are significantly lower than if you claimed at full retirement age (around 66). Furthermore, the payments will stay lower for the rest of your life. Depending on your life expectancy, this means that postponing claiming benefits might give you a larger lifetime sum of money received from Social Security.
If you decide to postpone claiming Social Security, you can receive delayed retirement credits– until age 70. This difference in delaying benefits until 70 can be substantial: for those born before 1960 nearly a third higher, and for those born after, nearly 24% more!
But I don’t want to wait until 70!
One possible reason to claim Social Security earlier as opposed to later is if you are pessimistic that the system will be able to pay anticipated benefits decades into your retirement. As Americans are having fewer children and are living longer, a shrinking working population needs to support a growing retired population. By 2080 analysts think that nearly a quarter of all Americans may be retired, and the system might not be able to afford to pay them all. By taking Social Security now, at least you know you get something.
Base your decision on when to claim Social Security on considerations such as:
1. If you are healthy enough to continue working,
2. If your cash flow enables you to live comfortably with postponing claiming,
3. If you believe in the continued ability of Social Security to continue paying,
4. If the WEP (windfall elimination provision), which reduces post-retirement claims if you receive certain work pensions (though not Bituach Leumi), will affect you. For more information about Social Security and the WEP, click here.
Deciding when to claim Social Security is one step in your comprehensive financial plan. To create/review your plan, contact a qualified financial advisor.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published June 7, 2016.