When Should You Start Taking Your Social Security Benefits?

Most advisors recommend waiting as long as possible to begin collecting Social Security benefits. Of course, every situation is unique. The best time to take Social Security benefits is not the same for everyone. You must consider your particular financial needs, health, post-retirement plans, and more in deciding when to take your benefit. Here are some statistics to help you make an informed decision.

What Is Your Full Retirement Age For Social Security?

The first number you need to know is your full retirement age—the age at which you can collect 100 percent of your benefit. Your full retirement age depends on when you born. For people born in 1937 or earlier, the full retirement age is 65. For those born in 1938 and beyond, the full retirement age rises gradually to 67.

What happens if you begin taking Social Security before your full retirement age? You can start taking your benefit as early as age 62. According to the Social Security Administration, if your full retirement age is 67, your benefit will be reduced by approximately:

  • 30 percent if you start collecting at 62
  • 25 percent if you start collecting at 63
  • 20 percent if you start collecting at 64
  • 3 percent if you start collecting at 65
  • 7 percent if you start collecting at 66

Bottom line? If you start collecting early, your retirement benefit will be permanently reduced.

Collecting Social Security Benefits After Full Retirement

Full Retirement Age Social Security

What if you don’t start taking Social Security benefits until after your full retirement age? As you would expect, you’ll be rewarded for this. For example, if your full retirement age is 66, you’ll receive 108 percent of your monthly benefit by waiting until age 67. Wait until the age of 70 and your monthly benefit rises to 132 percent.

So, based purely on the numbers, you can see why many advisors recommend waiting. Your benefit is significantly reduced the earlier you start taking it and considerably higher the longer you wait.

Now, many people will say, understandably, that they worked long and hard to earn their benefit and want to start enjoying it as soon as possible. There are also certain situations when taking your benefit early makes financial sense. If you’re in poor health, with a lower than average life expectancy, and you’re in need of income, taking your benefit early may be appropriate.

In addition, married women are often good candidates for claiming early benefits because they’re likely to live longer, and to have earned less, than their husbands. If your husband’s benefit will be larger than your own, you will receive this larger benefit when your husband passes away. It’s important to note that if your husband claimed early benefits, this scenario does not apply.

What Is The Break-Even Point for SS Benefits?

The break-even point occurs when the total value of higher benefits (the result of waiting to take them) exceeds the total value of lower benefits (the result of taking them early).

Consider the following example. Let’s say the full retirement age for a particular retiree is 67, and the full retirement benefit is $1,000. If he chooses to begin receiving Social Security income at age 62, his full retirement age benefit of $1,000 will be reduced by 30%, leaving him with $700 each month. If the retiree’s co-worker with the same birth date and earnings history decides to take his benefit at full retirement age five years later, the benefit would equal $1,000 each month. For the first five years, the first retiree receives a total of $42,000 ($700/m x 60 months) while the second retiree receives nothing.

Once the second retiree begins receiving benefits, he receives $300 more each month or $3,600 more per year than the first retiree.  In order for the second retiree to earn back the $42,000 that would have been received if he had retired at age 62, the second retiree would need to live until the age of approximately 78 years and 8 months.  This is called the Social Security break-even age, at which point both retirees would have received $140,000. (The first retiree would have accomplished this in 18 years and eight months while the second retiree would have done so after 11 years and eight months.) After the break-even point, the second retiree will earn more over the course of his or her life than the first retiree.

The law allows you to wait until age 70 before claiming your Social Security benefit and your benefit will continue to grow until claimed.  But how long will you live? And are your financial resources sufficient to wait?  Of course, none of us can predict the future. Deciding when to take Social Security benefits is up to you. The best piece of advice we can offer is that if you don’t need the funds earlier, it’s probably best to wait as long as possible.

Get Advice From An Experienced Elder Law Attorney

Clifford M. Cohen has more than 35 years of experience and dedicates his practice to guiding aging individuals in the Maryland and D.C. area through all facets of elder law care. Contact us today at 202-895-2799 for a free case evaluation.