Client Question: When Should I Start Taking Social Security?

When you have been working for a long time, you generally start looking forward to retirement.  You know you are eligible for Social Security benefits, and you have been thinking about when you should start taking the income you have worked so hard to earn.  But, when you weigh your Social Security options – depending on a number of factors, of course – you may decide you could work for a few more years if it means getting a bigger monthly benefit.  How can you make a smart decision that fulfills both your short term and long term goals?  Let’s review your options:

Your Options: The earlier you begin taking Social Security benefits, the smaller your monthly payouts will be.  Conversely, the longer you wait, the higher the monthly benefits will be.  If you defer your benefits until the maximum age of 70, your monthly benefit could be as much as double what your “full retirement age” payout would provide.  No matter your choice, you will receive the same amount of money form the Social Security Administration (SSA) – if you take your funds early, they will need to last longer; if you take a later withdrawal, the money you would have earned has simply accrued to a higher amount, due to your older age.

What Is Your Full Retirement Age?  While you can start withdrawing Social Security benefits as early as age 62, if you were born before 1937, your ‘full retirement age” as determined by the SSA is age 65.  If you were born after January first 1938, your “full benefit age” is 67.

How Much Can You Save by Delaying Retirement?  You can earn quite a bit more per month by taking your benefits later – even if by just a few years – than your full retirement age.  This is because the government affords you what’s called delayed retirement credits, allowing older beneficiaries to increase their benefit payouts.  Depending on your year of birth, you accrue a sizable yearly rate of increase in your benefit amount.  So, if you were born in 1935-1936, your increase is valued at 6.0 percent.  If your birthday was in 1941 or 1942, you’ll receive a yearly increase of 7.5 percent.  If you were born in or later than 1943, every year you defer payment earns you an increase of 8.0 percent.

If you cannot delay your retirement until age 70, remember then if you were born after 1937 (making your full retirement age 67), and you elect to start taking SS benefits at age 62, your monthly benefit is cut by more than 30 percent.  If you can wait to age 66, however, you’ll only lose about 6.7 percent of your benefits.

Important Factors to Consider:  According to the SSA, you should ask yourself the following questions when determining when you plan to start drawing benefits:

  • Are you still employed?  If so, could you see yourself working a few more years, or are you ready to get the heck out of there?
  • How is your health?  There’s no point in continuing to try and work if you’ve somehow become physically disabled, but if you still feel well, some extra time at work could be well worth it.
  • Does your family have a history of longevity?  Taking family history into consideration is important, but you’re really just making an educated guess with all these methods.
  • Will you still have health insurance if you retire early?  You won’t be eligible for Medicare until you’re 65, so if you want to stop working at age 62, be sure to consider how you’ll cover your health care expenses in the interim.
  • What other retirement assets do you have?  If you’ve been planning for a while and have an annuity, pension, IRA or 401(k) to supplement your income, taking an early Social Security benefit may be your best choice.
  • Will any other family members qualify with you on your record?

Your Social Security needs are a great thing to discuss with your ShindelRock tax professional, as he or she may have some valuable insight on the matter based on what they know about your particular circumstances.  And of course, you can also learn more about Social Security by visiting the website,