When Should You Start Taking Your Social Security Benefits? | SB Elder Law

Most advisors recommend waiting as long as possible to begin collecting Social Security benefits. Suze Orman, a contributor to AARP Magazine, makes a strong case for this approach. She argues that with people living longer than ever before, 70 is the new 65. What concerns her the most is not funding the first 10 to 15 years of retirement but rather the 10 to 15 years after that.

What Do the Numbers Have to Say?

Of course, every situation is unique. The best time to take Social Security benefits is not the same for everyone. You must consider your particular financial needs, health, post-retirement plans and more in deciding when to take your benefit. Here are some statistics to help you make an informed decision.

The first number you need to know is your full retirement age—the age at which you can collect 100 percent of your benefit. Your full retirement age depends on when you born. For people born in 1937 or earlier, full retirement age is 65. For those born in 1938 and beyond, full retirement age rises gradually to 67.

What happens if you begin taking Social Security before your full retirement age? You can start taking your benefit as early as age 62. According to the Social Security Administration, if your full retirement age is 67, your benefit will be reduced by approximately:

  • 30 percent if you start collecting at 62
  • 25 percent if you start collecting at 63
  • 20 percent if you start collecting at 64
  • 13.3 percent if you start collecting at 65
  • 6.7 percent if you start collecting at 66

Bottom line? If you start collecting early, your retirement benefit will be permanently reduced.

What If You Don’t Start Taking Social Security Benefits Until After Your Full Retirement Age?

As you would expect, you’ll be rewarded for this. For example, if your full retirement age is 66, you’ll receive 108 percent of your monthly benefit by waiting until age 67. Wait until the age of 70 and your monthly benefit rises to 132 percent.

So, based purely on the numbers, you can see why many advisors recommend waiting. Your benefit is significantly reduced the earlier you start taking it and considerably higher the longer you wait.

Now, many people will say, understandably, that they worked long and hard to earn their benefit and want to start enjoying it as soon as possible. There are also certain situations where taking your benefit early makes financial sense. An article on points out that if you are in poor health, with a lower than average life expectancy, and you are in need of income, taking your benefit early may be appropriate.

In addition, married women are often good candidates for claiming early benefits because they are likely to live longer, and to have earned less, than their husbands. If your husband’s benefit will be larger than your own, you will receive this larger benefit when your husband passes away. It’s important to note that if your husband claimed early benefits, this scenario does not apply.

The Break-Even Point

The break-even point occurs when the total value of higher benefits (the result of waiting to take them) exceeds the total value of lower benefits (the result of taking them early).

Consider the following example. Let’s say Joe is eligible to collect a reduced $900 benefit at age 62 plus 1 month. Since his benefit would have increased to $1,251 if he had had waited until age 65 and 10 months to take it, Joe’s estimated break-even age would be 75 years and 5 months. In this example, if Joe expected to live beyond the age of 75 years and 5 months, it could be a financially sound decision to delay taking benefits.

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Author Bio

Julianna Malis is the Founder and Managing Partner of Santa Barbara Estate Planning & Elder Law, a Santa Barbara estate planning law firm she founded in 2014. With more than 25 years of experience practicing law, she has dedicated her career to representing clients in a wide range of legal matters, including estate planning, elder law, Medicaid and Medicare planning, probate, and other estate planning areas.

Julianna received her Juris Doctor from the University of the Pacific — McGeorge School of Law and is a member of the California State Bar Association.

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