It’s a question that’s on the minds of many of our clients. When is the best time to begin collecting Social Security benefits? While the question may be common, the answer is a highly individualized one that depends on each person’s circumstances. In this blog post, we’ll take a look at several key factors involved with making this critical decision.
Let’s begin with age, as it plays a pivotal role in helping you decide when to start receiving your monthly benefit.
The earliest you can start is age 62. If you start collecting then, you’ll receive 25 percent less than if you wait until your full retirement age of 66 (if you were born between 1943 and 1954). For those born later, the reduction gradually grows to 30 percent. If you were born between 1955 and 1959, a few months are added each year to compensate for the gap between 66 and 67. There’s also the option of waiting until your 70 and receiving your highest benefit, which will be 32 percent greater. Your benefit does not increase after you turn 70.
By way of example: Someone born between 1943-1954, receiving $1,000 month at age 66, would get $750 at age 62. At age 70, the benefit would increase to $1,350 per month.
As this is a choice that will impact your finances, and, if you’re married, your spouse’s finances, for the rest of your lives, we stress that you consider it very carefully. Keep in mind, each person’s decision is based on his or her individual circumstances, including life expectancy, physical health, income needs, spouse and survivor benefits, as well as how long you plan to work.
When all is said and done, you’ll end up with the same amount of lifetime payout, regardless of when you begin collecting, according to the Social Security Administration. That’s assuming you live to your life expectancy, which, for a woman turning 65 in 2019 is 86.7. For a man, it’s 84.3, according to Social Security’s life expectancy calculator, which you can find at www.ssa.gov/planners/lifeexpectancy. The longer one lives past that age, the greater the lifetime benefit. However, if one is in poor health, it may be wise to begin collecting sooner.
While there are many useful tools and resources on the Social Security website to help guide you, some may want to consider paying a fee-only financial advisor to review all the options.
On the whole, if you have enough other investments to cover your expenses, you may want to delay drawing down on your Social Security benefits until you need them and allow them to grow by approximately 8 percent, yearly. On the other hand, maybe you’d prefer to leave those other assets alone and pass them on to your heirs.
As you can see, multiple factors need to be considered when deciding the best time to begin collecting your Social Security checks. The official government website www.usa.gov/federal-agencies/social-security-administration is a good place to start.