Social Security – Take it now or take it later!

Written by: Gerald J. Ricciardo, CFP®

A worry for individuals nearing retirement age is when to commence drawing social security benefits. For those born between 1943 and 1954, you are eligible for full retirement benefits at age 66 but can start receiving benefits at age 62.  However, drawing social security at age 62 means a 25% lower benefit amount excluding the annual cost of living adjustment.

What is right for you?

It makes sense to take benefits early if:

  • You are in poor health or your parents and grandparents did not have a long life.
  • Money is needed to supplement your other sources of retirement income.
  • You are confident that you can invest the SS benefit at a higher return (greater than 8% per year excluding inflation) as opposed to waiting for the higher benefit at full retirement age.

It makes sense to wait to full retirement age or later if:

  • You are in good health or your family has a long life expectancy.
  • A larger survivor’s benefit to your spouse is desired.    Spouse’s survivor benefit is based on your benefits, which can make a significant difference if you delay your start date.
  • You desire to lower your tax burden when you are in your 70’s.  If you start living off your retirement income in your 60’s and delay Social Security until age 70, you should have a lower tax liability.  This is because you will have less retirement income in your 70’s, which is usually taxed at 100%, and more Social Security income, which is, taxed at most, 85%.