Friday, September 01, 2017

When to Take Social Security

We have a more complicated that usual decision on when to apply for Social Security.  Because we will have minor children when I turn 62, the children and my spouse will qualify for auxiliary benefits when I file.  So the children will collect auxiliary benefits until they are 19 and my spouse will collect auxiliary benefit until the youngest turns 16.   Due to the auxiliary benefits, a simple calculation the break even age is around 88 years, i.e. after 88, I would be better off to have waited.

I have even read one article,  Why Social Security Dependent Benefits For A Child Can Make It A Good Deal To Start Early And NOT Delay, that shows one never breaks even, assume 3% inflation, 6% growth and the lost opportunity cost of spending down other assets.

The downside of take Social Security early is the reduction of the survivor benefit, if my spouse out lives me.    At my death, my spouse would receive my benefit, which is higher than the spousal benefit.  However, if I wait until I am 70, she would get a significantly higher survivor benefit that has a cost of living adjustment, which makes it attractive to wait.

Of course, that assumes that Social Security will be around or won't reduce benefits in the future.  So maybe taking it early will ensure we receive some benefits before any future changes are made.  

In any case, I sill have a couple years to decide and should wait since the rules may change between now and then.

For more on Reaping the Rewards, check back Fridays for a new segment.

This is not financial  or retirement advice. Please consult a professional advisor.

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