Social Security Retirement Benefits: Should We Take Them Early or Wait?
Many of us look forward to the day we can start receiving our social security retirement benefits. And most of us may have assumed we would take them at age 65 or whatever our full retirement age happens to be. But as we edge closer to age 62, we may be asked if we plan to begin our benefits when we reach age 62. At this point, we may consider taking the benefits earlier than we originally planned. So let’s look into the question: when should we begin drawing our social security retirement benefits?
When Can We Begin Taking Social Security Retirement Benefits?
First, we should know when we can take our benefits. Although the rules about taking social security retirement benefits are long and complex, the rules that apply to most of us are the same. So we’re going to focus our attention on those.
We can begin taking benefits at age 62. We can wait until age 70. Or we can take our benefits at our full retirement age which ranges from age 65 to 67, depending on what year we were born. If we begin our benefits at age 62, our monthly payments could be as much as 30% less than the payment we would receive if we waited to take them at full retirement age. But we can receive more than the full retirement age payment if we wait until age 70. For each year beyond our full retirement age that we wait, our benefit increases by 8%. So, waiting until age 70 could result in a 24% increase in benefits compared to taking them at full retirement age. But the more staggering difference shows up when we compare taking our benefits at age 62 and age 70. The difference in monthly payments if we take them at age 62 compared to age 70 could be as much as 77%.
What Factors Should We Consider?
As you can see, the age we choose to begin taking our benefits can have a huge impact on our monthly payment. But the impact on our monthly payment is only one factor we should consider. There are many factors, and they will vary from person to person. We are better off evaluating these important factors with our financial advisor, CPA, and estate planning/elder law attorney if we want to be confident that we’ve made the best choice.
Some factors we should consider are financial. For instance, how much income we receive from other sources, how much we intend to take from the balance of other assets and retirement accounts, and how much is needed to keep our retirement standard of living are all important factors.
Nonfinancial factors should be considered, too. For example, we may want to travel or to do certain other things that our health could prevent if we wait. Taking benefits early and retiring may allow us to make those memories and enjoy those experiences while we’re still able. We should be realistic about this though. If we’re married, we need to consider our spouse and be honest about how much time our spouse can truly stand to be around us. It might be less than we think. And, if that’s the case, we might need to consider an alternative to early retirement.
How long we expect to live is another important factor. Although we don’t have a crystal ball and we can’t predict how long we will live, most of us have an opinion based on our own health or family history. (An unhappy spouse may affect our lifespan too. Consider the wisdom in the earlier paragraph about considering our spouse when we think about early retirement.) Calculations show that someone who dies before their late 70s and begins taking benefits at age 62 can expect to receive more lifetime benefits than if they waited to take benefits. However, these calculations also show that those who live beyond their late 70s receive more lifetime benefits by waiting to take benefits.
When Should We Begin Taking Social Security Retirement Benefits?
Deciding when we should take our social security retirement benefits is a very personal decision. Our finances are simply one factor among many that influence the decision. For some of us, taking our benefits at age 62 is clearly the best option. For some of us, waiting until full retirement age might make the most sense. And for others of us, waiting to age 70 may be a no-brainer. Regardless, we can be more confident about our decision if we take the time to consider it with our professional advisors, such as our financial advisor, CPA, and estate planning/elder law attorney. We are happy to work with you and your other advisors as you consider this important question. Contact us for more information.