When to take Social Security?
For most retirees the social security benefit will make up a significant percentage of their income during their requirement years. The question always comes up, when is the best situation to take social security and when is the best time to delay?
Before we get into answering this question, let’s review the some basic facts. Assuming you were born between 1943 and 1954 your full retirement age is 66. For those born after, each year up to 1960 the retirement age increases 2 months. So say you are born in 1955 your full retirement age is 66 and 2 months old. For starters, you can begin collecting at 62 however you will only receive 75% of the full benefit. There is also a schedule based on when your spouse takes it and that will also impact what you can get, see chart here.
Where it gets a little interesting is when you start to delay your benefits. If, for instance, you delay until you are 67 you will receive 108% of your full benefit and if you wait until 70 you will get a whopping 132% of your standard benefit! Age 70 is the longest you can delay however the amount received is substantial. It is worth noting that while the initial reaction is to take it as soon as it’s available; the benefit you receive at 70 is actually disproportionately high based on the actuarial tables. In other words, it’s a much better deal. It is also important to realize that social security is one of the very few pensions that index for inflation, VERY important.
Understanding these numbers are an important step to maximizing the amount you can take. So, when is the best time to take social security? This depends on a number of factors. The first one is need. If you simply cannot afford it and you absolutely have to take it, then by all means paying your bills and being able to live is your first priority.
Second, assuming you can live off other assets, the next question is how is your health? If you are in relatively good health, it may be to your benefit to wait. Conversely, if you are in not the best of health, it may be worth it to take the benefit sooner. The end result is each person is different and everyone has to do what they feel most comfortable with however understanding the rules of the game are critical. I don’t want anyone to miss out and leave money on the table if they don’t have to.
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