When Should I Take Social Security?

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One of the most common questions we get from people who are starting or approaching retirement is when should I begin taking Social Security?  It isn’t a surprise, as there are so many factors that affect this decision.  Most people think the answer is as simple as whatever way I can get the most money from the Social Security System.  So, let’s break down the key things that will affect this.

1.    Your Health and Lifespan.
2.    Your other report-able income
3.    When you start taking it
4.    Spousal benefit

1.    Your health and lifespan. – While this point is a pretty obvious one, it is a key consideration. Social Security only pays as long as you live.  So if you wait until age 70 to start taking it, and die at 71, then you got a lot less money from the system, than if you had started when you were first eligible.  On the flip side, if you lived to age 100, you will have made way more money than if you had started when you were first eligible.  When ignoring all other factors, easy math says, if you will die young, take it young, if you will live long, delay as long as possible.

2.    Your other report-able income – Social Security is a really special case when it comes to taxation.  It can be tax-free, up to half of it can be taxed, or up to 85% of it can be taxed all depending on your total income, and what type of income that is.  (This is one of the major reasons you hear us advising to increase your tax-free retirement income!  Because not only do you pay less taxes in retirement on that money, it will also decrease your taxes on Social Security!)

3.    When you start taking it – One of the biggest rules to remember when talking about social security is that it is a guaranteed 8% growth per year you delay it (or reduction if you take it early).  For example, if you had a $2,000/month Full Retirement Age (FRA) amount, and you took it 2 years early, you would only receive, $1,693/month but if you delayed two years after FRA you would receive $2,333/month.  That’s a significant difference that will greatly add up over time.

4.    Spousal Benefit – Depending on how much your spouse has worked, they can either take their own social security or half of yours.  Obviously, you will want to take whichever one is higher, but given the points above, those numbers can change.

Hopefully these 4 facts aid you in the deciding when to begin taking your Social Security.  Remember, this is a crucial decision, that can dramatically affect your golden years.  The best advice I can give you is to sit down and have an in-depth discussion with your advisor and go over the intricate details.  This is not a decision you want to make without an experts help.  Give our office a call today, for help with your unique situation.  However, before I end this article, I did leave out one significant point, which we will discuss next month.  The key to retirement is not maximizing your Social Security; it’s maximizing your total retirement income.  Social Security is only one piece.  Be sure to read next month to hear about the other pieces and how they fit together.