One For The Money

• Assessing your options [01:16]
• Later filing eventually passes earlier filing [04:25]
• When should you consider taking Social Security early? [05:56]
• Social Security when you have other income [09:26]
• Many people take Social Security too early [10:59]
• Strategies for married couples [12:29]

I’m often asked when a person should take Social Security. The answer to this question requires discussing goals, assessing additional sources of income in retirement, and running projections in my financial planning software. Far too many Americans don’t consider these factors when making this critical decision. Instead, they take Social Security based on what their friends decided to do - friends who likely have very different financial situations and goals. 

If you take Social Security at age 62, your benefit will be up to 30% less than at age 67. That reduction is for the rest of your life and is a 6% yearly decrease when taking benefits early. If you wait until age 70, your benefit will be 32% more each month than it would be at age 67 for the rest of your life. That’s an 8% increase each year you wait.

While taking early Social Security would mean collecting for more years, eventually the benefits of filing later catch up with earlier filing. How long would you need to live to have gained more with later filing? According to JP Morgan, a median Social Security earner taking benefits at age 67 will have received more at just over age 76 than if starting at age 62. If you take benefits at age 70, you’ll have received more by age 80 and five months than if you had started at age 62. By age 90, you will have accumulated $125,000 more if you waited until age 67 versus 62.

Deciding when to take Social Security depends on two main factors: life expectancy and sources of income. If you have a shorter life expectancy based on family history and health and don’t think you’ll live into your late 70s or early 80s, delaying Social Security doesn’t make sense. However, if you have a long life expectancy, it can be in your best interest to delay taking benefits as long as possible. 

Taking early Social Security may also make sense if it’s your primary source of income in retirement. You may not have the option to delay. Other than that reason and a shorter life expectancy, I firmly believe it makes more sense to delay Social Security provided a comprehensive analysis was completed. Social Security is critical to retirement, so choosing wisely and assessing goals is imperative. This decision is far too important to leave to chance or go along with the crowds.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Which Social Security Claiming Strategy Generates the Highest Legacy Value? | Financial Planning Association
• Guide to Retirement | J.P. Morgan Asset Management
• The Most Popular Ages to Collect Social Security
• Research Summary: Early Claiming of Social Security Retirement Benefits Increased During the Recession
• U.S. Retirees Aren't Waiting Till Age 70 to Collect Social Security - TheStreet