One of the most common questions we receive is “When should I start claiming Social Security?” If you are like most people we encounter, this can be a confusing and sometimes stressful issue. Adding to the confusion, is the inundation of articles every day extolling the benefits of drawing as early as possible or delaying till age 70 in order to gain the highest possible benefit. So which one is it? Unfortunately, because each situation is unique, there is no rule of thumb on this issue, which makes it imperative to analyze each individual circumstance.
Technically, you can begin claiming social security at any point after turning 62. However, there are three separate ages which act as milestones for benefits: at Age 62, at Your Full Retirement Age, and at Age 70.
Claiming at Age 62
The benefits to claiming at age 62 are straight-forward. By starting as early as possible, you begin to receive an income stream that will allow you to leave your portfolio intact for as long as possible. It also ensures you receive the most benefits should you die in your 60’s or 70’s. Additionally, this can be appealing for people who will have a low taxable income in retirement due to the favorable tax structure of Social Security benefits. Lastly, for couples with a large gap between their ages and/or incomes, this can be an attractive option as they are able to receive some benefits while waiting for the larger benefit to accrue. A note of caution for those who are still working at age 62. If you start claiming benefits early and continue to work, your Social Security benefit will be offset depending on the amount of income you receive. This will have the negative effect of not only reducing your current income, but also permanently reducing your Social Security Income once you retire.
Claiming at Full Retirement Age “FRA”
The government has set the full retirement age between 66-67 depending on your date of birth, so this becomes the default option for many people. There are some benefits to waiting till full retirement age especially for those of you who are still employed or born before January 2nd, 1954 (stay tuned for another post on this). Unlike drawing at 62, you are free to earn as much income as you can without fear of offsetting your Social Security benefits.
Claiming at Age 70
At age 70, you should start collecting your benefits (if you haven’t already) as your benefit will no longer continue to increase at this age. Waiting until 70 allows you to collect the largest possible benefit for as long as either you or your spouse lives. For every year you delay, there is government guaranteed 8% permanent increase to your SS income. This can be especially beneficial for couples where both spouses paid into the system and one, or both, can delay their benefits. Increasing your monthly benefits will also decrease your reliance on your investment portfolio, which is important should either you or a spouse live a long life. Additionally, if either spouse passes away, their survivor will continue to receive the highest benefit between the two. That means, by delaying your claiming age, you can better protect your spouse financially after you’re gone.
Let’s not forget that claiming Social Security benefits is only one facet of your retirement picture, and each situation requires a strategy or plan because your life is unique. Also, if you claimed social security recently and are having second thoughts, there are some steps that you can take to correct course.
I hope that I’ve left you with a seed of curiosity that will grow into a larger conversation about figuring out what’s best for you and your family when it comes to claiming Social Security Benefits. Be sure to speak to an advisor about which strategy makes the most sense for you.