Also, if you collect benefits before full retirement age and are still earning income, above $14,160 (in 2009), your benefits will be reduced by $1 for every $2 earned, except for the year in which you reach full retirement age, when they will be reduced by $1 for every $3 earned over $37,680 (in 2009). This earnings test is eliminated the month you reach full retirement age.
Still, many people have a reason to apply for early benefits. Perhaps they've lost a job or no longer can work. (People younger than age 65 can apply for Social Security Disability Insurance benefits -- if they're disabled and cannot work.) Or you might take a look at your health, or your family longevity, and conclude that you have a relatively short life expectancy and should start taking benefits early.
If you start collecting benefits at age 62, your check will be reduced significantly. If you were born between 1943 and 1954 and start taking benefits at 62, your monthly check will be about 25 percent lower than at full retirement. For those born in 1960 and later, the reduction rises to a maximum of 30 percent.
Delaying Social Security Benefits
If you're still working, your Social Security benefits will be added to your income -- and possibly subject to tax. There is no longer an earnings limit reduction to the benefit amount if you keep working after full retirement age, but you might want to wait until you retire and have less taxable income -- and receive a larger monthly check.
If you delay applying past full retirement age, your check will be increased substantially, depending on your age. For example, if you were born in 1943 or later, and you delay four years, to age 70, you would get a 32 percent increase (8 percent per year). No additional credit is given for waiting beyond age 70.
With baby boomers now reaching retirement age, Social Security is geared up to answer your questions and make the process easy. Boomers earned Social Security by paying those huge taxes along the way. Now, it's time to enjoy the benefits. And that's The Savage Truth.
How You Can Pick Terry's Brain
To celebrate the 20th anniversary of my Chicago Sun-Times column, I'll be responding to your most frequently asked questions on a regular basis. Of course, you always can submit individual questions on my Sun-Times blog reached on the home page at www.TerrySavage.com.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5's 4:30 p.m. newscast, and can be reached at www.TerrySavage.com. Her new book, "The Savage Number: How Much Money Do You Make?" has just been published. To find out more about Terry Savage and read her past columns, visit the Creators Syndicate Web page at www.creators.com.