The most critical decision you’ll have to make as a retiree is when to start taking Social Security.
If you take benefits too early, you’ll stop paying into the system. Thus, you’ll receive smaller payments after retirement.
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Wait to receive benefits when you’re older, and you’ll get a bigger check. Take Social Security too late, however, and you may not be able to enjoy it for very long.
So, when is the optimal time to start taking Social Security? The answer depends on your “full retirement age.”
Depending on your birth year, you’re eligible to receive full retirement benefits between the ages of 65 and 67. But, you may want to retire earlier or continue working past age 67.
Here are some things to mull over as you decide when to start collecting Social Security
Experts Recommend Putting It Off for as Long as Possible
Many experts recommend postponing Social Security benefits if you can.
Why should you wait?
If you continue to work, then you’ll earn more money.
Here’s an example of what benefits you could lose. If your full retirement age is 67, taking Social Security early can reduce your benefits:
- Age 62 - Total retirement benefits reduced by about 30 percent
- Age 63 - Total retirement benefits reduced by about 25 percent
- Age 64 - Total retirement benefits reduced by about 20 percent
- Age 65 - Total retirement benefits reduced by about 13.3 percent
- Age 66 - Total retirement benefits reduced by 6.7 percent
At the very least, wait until your full retirement age as determined by the Social Security Administration (SSA).
As you can see, if you can wait until you reach full retirement age then you’ll receive higher payments.
It seems like a no-brainer. Bigger SS payments are better. So do everything you can to push off retirement until necessary.
Consider Your Health and Life Expectancy
Did your parents and grandparents live for a long time?
If you have good genes, waiting to file may be a good option.
Think about it:
Larger Social Security checks will be helpful if you outlast your investment income.
However, if you’re having health issues, filing earlier on might be helpful. It’s impossible to know the future, so you have to go with your gut.
Carefully weigh your options. Consider your health and life expectancy before you decide.
It’s impossible to make a ‘perfect’ decision, so do your best based on what you know today.
Consider Your Career Timeframe
One of the nice things about Social Security is that you can continue to work and receive more benefits.
Your benefits aren’t going to max out just because you reach full retirement age.
If you like your job and want to continue working, then more power to you. Some people work through their 70s because they love staying active.
If you don’t feel like retiring, it’s okay to continue working. No rule says you have to quit (unless your employer doesn’t give you a choice)!
You might as well keep living your best life. Staying busy at work will likely help you live longer, too.
Why is this?
According to Harvard Health Publishing, working later in life can improve mental health and prevent disease.
Continue to prosper in your career (especially if you enjoy it), and earn more benefits. It’s a win-win if you enjoy your job because you can collect higher Social Security payments later on.
In the meantime, your Social Security will increase, but it depends on when you were born.
If you were born after 1943, it’s 8% annually.
For example, if you were to receive $1,000 at your retirement age, you could boost your benefits to $1320 by waiting until you’re 70.
Review Your Finances
The earliest you can start taking Social security is age 62. But as we mentioned earlier, you’ll have to pay a 30% penalty.
If you decide to keep working and collect Social Security, you can still lose out on benefits. That’s why experts recommend waiting if possible.
If you’re unemployed and don’t have any savings, then waiting to collect doesn’t make sense. You’ll still have to make ends meet to live.
If you’re in debt, take the money as soon as you qualify. The last thing you need is to sink into further debt or worse, go bankrupt.
You’ll collect smaller payments, but hopefully, you can be financially savvy and make up the difference.
Social Security should never be your primary retirement income source. Think of it more like an insurance policy that helps maintain your cost of living.
It should also serve as a reserve for after you run out of retirement money.
Save as much of your Social Security money as possible. If you live into your 80s and beyond, you’ll be happy you put money away.
Taking social security is a difficult choice. Be sure to consider your personal and financial needs as well as your projected lifespan. Weighing out all the options will help you make a more informed decision.
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