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What is the best time to apply for Social Security benefits? Learn to avoid penalties and maximize benefits even though working after retirement age.

According to the Social Security Administration, early retirement benefits are available beginning at age 62. To apply for benefits, the agency recommends applying within three months before payments should begin. In addition, the agency recommends applying before reaching age 65, regardless of a voluntary delay accepting retirement benefits, to avoid increased costs in Medicare payments.

Social Security Benefits

The amount of Social Security benefits payable, if selecting early retirement, is less than the full measure of benefits earned. The current rule requires a deduction in payments equal to one-half of one percent for each month before reaching full retirement age. For example, if a person born after 1960 requested early retirement at age 62 and is subject to a 67 year minimum retirement age, then 60 months times one-half percent requires a reduction in Social Security benefits of 30%. A person who delays benefits after reaching the minimum retirement age receives and additional 7% increase each year.

Medicare Benefits

Recent changes in Medicare regulations require that all eligible applicants file a formal election under Part B of the medical insurance plan. If a Part B election is not filed within three months of turning 65 years old, the cost for insurance premiums may increase. Rules regulating Part B supplemental coverage are complex. Discuss options months in advance of the deadline with a trusted counselor.

Working While Receiving Benefits

All people who reach the Social Security minimum retirement age may receive full benefits. After reaching the applicable age, full benefits are payable without regard to work status. This option is attractive to all people who desire to increase retirement income. If electing early retirement, special rules apply that reduce payments based on the amount of income earned by each beneficiary.