When Does Collecting Social Security Early Make Sense?Submitted by The Participant Effect on April 16th, 2019
Full retirement age (FRA) for Social Security benefits is currently between 66 and 67, depending on when you were born. Benefits are determined based on your 35 highest years of earning on record with the Social Security Administration, but will be higher or lower depending on when you file. If you file at FRA, you’ll get your full monthly benefit.
For each year you delay past FRA, however, your benefit will be increased by 8% until the age of 70. The earliest you can currently file is age 62. For each month ahead of FRA you file, benefits are decreased by a certain percentage. If, for example, you elect to begin receiving benefits at 62 when your FRA is 67, your monthly payment will be approximately 30% lower. But despite this fact, 62 is the most common age to claim Social Security benefits — often because, unfortunately, people are just not in a position to wait.
Determining the timing of Social Security benefits is an important decision that can have lasting consequences. You want to make a choice that’s in your long-term best interest. In many cases, it’s advisable to wait to receive the larger benefit, but everyone’s circumstances are different so it’s a good idea to have a discussion with a qualified financial advisor when determining what’s best for you. But here are some factors in favor of electing to receive benefits early.
You’re currently in or anticipate poor health. If you have a progressive health condition or a family history that makes early health complications more likely, then you may want to consider taking benefits early — while you’re still well enough to take advantage of your retirement years.
You’re unable to continue working and need the money. Job loss and/or disability can sometimes make it unfeasible to wait until full retirement age. If your employer-provided or private disability insurance along with other resources can’t cover your basic needs, then you may have no other option but to collect early.
Your spouse can take benefits later. This approach might let you access some Social Security income immediately, while allowing your spouse’s benefits to continue to grow. You should probably run the numbers with a professional financial advisor, however, to make sure this strategy makes sense in your specific situation.
You have qualified dependents on your tax return. If this is the case, your dependents might qualify for benefits when you take your own. Again, this is another instance where it makes sense to have an expert help determine if this is in your best interest.
You can afford to. If you dislike your job and don’t need the additional funds provided by waiting until your full retirement age or beyond, then you may want to embark on this exciting time of life as early as possible.
Social Security is a central component to most retirees’ financial plan. It’s important to make a thoughtful and well-researched decision regarding how best to use this resource to finance your retirement.