When it comes to retirement planning, one of the biggest questions many people face is when to start taking Social Security benefits. It might seem like a simple question, but the answer can vary greatly depending on your personal financial situation, life expectancy, work history, and overall retirement goals. Let’s explore what can help you make a more informed decision for social security strategies and why this one choice can have a major impact on your financial future.
Understanding Social Security Basics
First, let’s review what Social Security is. It’s a federal program that provides a monthly income to retirees based on their lifetime earnings. You can begin claiming benefits as early as age 62, although your full retirement age, the age at which you can claim 100% of your earned benefits, depends on the year you were born. For most people nearing retirement today, the full retirement age is between 66 and 67 years old. This means that if you choose to claim social security early at age 62, you’ll receive a reduced benefit, or about 25–30% less than your full amount.
Why Timing Matters
Deciding when to take benefits comes down to trade-offs between receiving money sooner vs. receiving more money over time. Here are some scenarios to consider:
1. You Need the Income Now
If you plan to stop working at or before age 62 and don’t have other sources of income, you might need to claim early. While this means accepting a smaller monthly check, it can help cover immediate expenses if your other resources are limited. It should be factored into your over all plan though before making this decision.
2. You Have a Long Life Expectancy
If you’re in good health and have a family history of living well past the 80s, then delaying your benefits might pay off. The longer you live, the more advantageous it is to receive higher monthly payments so you can have more financial stability in your later years.
3. You Plan to Keep Working
If you keep working after age 62 and claim Social Security early, your benefits may be temporarily reduced if your earnings exceed certain limits. Once you reach your full retirement age, those reductions end, and your benefit is recalculated to credit the withheld amount. That means the money isn’t “lost,” just deferred.
4. You’re Concerned About Longevity Risk
For some retirees, the biggest concern isn’t running out of money at 67; it’s running out at 87. Delaying Social Security can act like a built-in longevity insurance policy by providing a higher income later in life when other assets may have been drawn down. The proper analysis should be done to determine if this is the optimal choice.
A Spousal Strategy
Married couples will have additional planning options when it comes to social security strategies. For example, one spouse can claim early while the other delays, helping to balance current income needs with long-term growth. Also, survivor benefits mean the higher-earning spouse’s benefit continues for the surviving spouse. In many cases, it makes sense for the higher earner to delay benefits as long as possible to maximize that future income. There is also potential spousal benefits that allow a spouse (or ex-spouse) to receive a monthly payment based on their partner’s Social Security earnings record, even if they have not worked long enough to qualify for their own benefit. These benefits are typically half of the spouse’s full retirement benefit, but can be less if the spouse starts receiving benefits before their full retirement age.
The Breakeven Point
You may have heard about the “breakeven point”, or the age when total lifetime benefits received are roughly equal whether you claim early or delay. Typically, that point is around age 78–80. If you expect to live longer than that, waiting to claim often leads to greater total benefits. However, retirement isn’t only a numbers game. Cash flow needs, health, family dynamics, and peace of mind all play an important role. No social security strategy is one-size-fits-all.
Strategize with Retire Wise Financial Services
Deciding when to take social security is one of the most important choices you’ll make as you approach retirement. The right decision can help make sure that you’re not only making the most of your benefits but also aligning them with the rest of your financial plan. At Retire Wise, we help you explore your options and plan with intention so you can feel prepared for every stage of retirement.
Insurance products are offered through the insurance business Retire Wise, LLC. Retire Wise, LLC is also an investment advisory practice that offers products and services through AE Wealth Management, LLC (AEWM), a registered investment adviser. AEWM does not offer insurance products. The insurance products offered by Retire Wise, LLC are not subject to investment adviser requirements. Neither the firm nor its agents or representatives may give tax or legal advice. Retire Wise, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. 3107263 – 6/25