Spoiler alert: It depends. There is no simple right answer. Below are some factors that may affect the decision.
An important retiree decision is when to start taking Social Security payments, whether early, at full retirement age (FRA), or delayed to maximum age of 70.
Taking it earlier reduces the payment, but one gets payments more years. Delaying increases the payment, but one will receive payments fewer years. The choice one makes depends on several factors.
One factor is how much each option pays in total. It is straightforward to mathematically calculate which payment choice is higher in total, early or delayed. Taking it early means getting more payments, which requires many years of getting payments at the later starts before breaking even, and after which the later starts will provide more total payments. I summarized the effect of taking Social Security at 62, 67 and 70 the chart below. For example, if one starts at 62, the recipient receives a smaller payment than at 67, but it will take until 78 for the total payments starting at 67 to match the total receive at 62.
| Age Later Start is More |
|---|
| Age to Start | 62 | 67 (FRA) | 70 |
| 62 | | 78 | 81 |
| 67 (FRA) | | | 82 |
| 70 | | | |
A financial factor to consider is whether you need the Social Security payments to cover expected retirement expenses. If you have enough other sources of income, it may be appropriate to delay. A benefit of having social security payments is it significantly reduces the amount withdrawn from retirement savings. Another benefit of delaying is the surviving spouse may receive a higher survivor benefit when the spouse with the higher payment passes away.
A personal factor is health and personal life expectancy. If one is in poor health or doesn't expect to live past the breakeven age, take it earlier. If one is in good health and have a good probability of a life expectancy past the breakeven age, then delay. Of course, there are no guarantees and unexpected occurrences can change expectations. I've know people who passed away a year after FRA. I've also know people who started at 62 and lived to their 90s.
A rare factor is whether they have minor children or a spouse eligible for auxiliary benefits, which are available to children up to 18 (19 if attending school) and a spouse caring for them. While most retirees do not have minor children, some do and this can be a substantial benefit and may push the breakeven age out further.
In my case, I originally was planning to wait until 70, to maximize the survival benefit for my spouse. I consulted with three financial advisors at our different brokerages and a social security expert. They evaluated my specific situation and recommended options. They all had similar recommendations of starting as early as 62. After reviewing the analyses, I decided to take social security earlier than my FRA, but later than the earliest starting age of 62.
At this point, I am satisfied and very happy with the decision I made. Social Security payments cover about 25% of our annual expenses which reduces our dependence on investment results. I highly recommend consulting with a social security financial planning expert, which many brokerages will provide at no charge.
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Strategies and Plans , check back every Monday for a new segment.
This is not financial nor social security advice. Please consult a professional advisor.
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