Should I Take Social Security Early?

Many people will reach the earliest age that they can take Social Security and wonder, “Should I take it now or should I wait?” What is the right answer? Everyone is different and has a their own situation so let’s take a look at a few of these

Before we get started let’s look at a few facts…

1. Your Social Security increases between 5 to 7% for every year you wait to take it from age 62 to your full retirement age, andbetween 7 to 8% a year after that until age 70, depending upon your year of birth.
2. The breakeven for taking income at age 62 and receiving the money early vs. waiting until full retirement age is right around age 78. Every year you live past age 78 that is more money you will receive by waiting until full retirement age.
3. If your planning on going back to work, you may not want to file because for every dollar you earn over the 2017 limit of $16,920 you lose one dollar of your Social Security.  This number increases slightly each year. This applies to your earning until the year you reach full retirement, then they allow you to earn $44,880 for 2017.

Let’s look at some instances when you may want to take it early…

I’m retiring early or I got laid off..now what?  This is in most cases the most obvious times that it makes sense to take your Social Security early, you need the money to live!  Go down and file as soon as you can.

You need to enjoy life! Here’s a very valid one that makes a lot of sense for early retirees.  I want to travel and really enjoy my early retirement and having the extra money will allow us to do more.  In our experience working with retirees you are most active in your earlier years of retirement.  Your health is better, you have more energy and many of you are like a kid that just got out of class for summer vacation rearing to go and tons to do!  You are in the GO GO phase of your retirement.  So what if you will have more money later while you sit in your rocking chair in the NO GO Phase of your retirement. Any extra will just go to the kids or get eaten up with Long Term care costs.  Go File and have a great time, plan all your trips, get the motor home and have a blast!!

My health isn’t very good and there’s a good chance I wont live past age 78. or  what if none of my family has lived that long? Unfortunately, this is the case for some retirees, and by all means take the funds now so you can enjoy it!  One caution on that note is what does your spouses’ social security look like because they will receive the higher of yours or theirs if you pass first.  (See article on When you should take Social Security later.)  If there is a green light with spousal income you might as well get the money while you can..go file!

You’re drawing too much income from your portfolio. Your planning to wait until full retirement age to take your Social Security. You need income either because of early retirement, lower wages, job loss, divorce, etc.  You have a portfolio that you are drawing from, but it’s eating up the principle.  If you’re taking more than about a 7 to 8 percent withdrawal rate for the few years until your Social Security kicks in, then you may find yourself eating up your capital too quickly.  It is always important to have some type of an investment portfolio for the future.   By filing early you keep your portfolio in tact.  Go file.. it will probably be worth it in the long run.  IF your not sure if this fits you or your concerned about your portfolio, drop us an email we will help you figure it out.

I just don’t think the funds will be there in the future and I don’t trust the Government?  According to statistics the Social Security Fund is solvent through year 2032 so do the math..if you feel they will be cutting it sooner go file!

I have a large net worth and concerned they will tax me more on my Social Security.  This is a very valid concern for folks who will have a lot of income in retirement, and with Social Security dwindling in the future there is a good chance higher income earners may see a reduction in their payments due to some type of means test.  No one knows the right answer to this but if your convinced of it, Go File!

You’re a widow or widower or your ex passed and your not married yet.  In this particular case you should take the widow’s benefit at an earlier age and you can still take yours at full retirement age but you just won’t get both.  This certainly helps to bring in more income.  You do want to make sure your taking the benefit at full retirement age that will pay you the higher amount, either the widow’s or yours. Go file and take the additional income.

Conclusion

Even though all of the in-depth software that is out today will always tell you to wait until later to claim benefits, these are just numbers they are not real life situations.  There is no right answer for every person, each situation needs to be closely analyzed and then a solid decision can be made.  If you feel you need help with this just drop us an email and we would be glad to discuss this with you ..we love to help!

See the next article..When you should wait until Full Retirement Age to Take Social Security.