Deciding when to start taking Social Security benefits is a big undertaking for most retirees. It may seem that it requires a mini-course, titled Social Security Benefits 101, to understand all the factors at play. That’s the reason that many retirees opt to hire a trusted financial advisor before making the plunge and deciding on the best strategy for signing up for benefits. While it’s a solid plan to consult with a professional, here are some tips from the experts to consider:
- Deciding to take benefits early is advantageous ONLY in limited situations.
- Signing up for benefits at the earliest age of 62, is a big temptation for many retirees.
- For most people, holding off until age 70, is the best strategy to allow benefits to grow.
- Claiming benefits early reduces your monthly paycheck amount—over the entire lifetime of your retirement earnings.
- At full retirement age, you qualify to get 100% of your benefits (based on your personal work history).
- Delaying until age 70 results in approximately 8% more in earnings for each year that you wait (after the minimum age).
- Financial consultants usually recommend waiting for as long as possible to start getting benefits, but some say that strategy is a gamble.
“You’re always betting you’ll live longer and get more money,” said Geri Eisenman Pell, CEO of Pell Wealth Partners at Ameriprise Financial in Rye Brook, New York. “The government is asking us to make a calculated risk decision on something we’ve been mandated to pay into and take a risk on the back end.”
John Piershale, wealth advisor at Piershale Financial Group in Crystal Lake, Illinois says, “If you’re going to take it at 62, if you’re single and you’re terminally ill and you know you’re not going to live very long, then you might go ahead and file early,” Piershale said. Peirshale goes on to explain that in most other situations, taking benefits early is not financially advantageous.
If you are married, claiming benefits early could lower the amount your spouse is entitled to once you are deceased. “You can still help out your surviving spouse,” Piershale said. “Once they get that survivor benefit, that’s permanent.” The amount of the survivor benefits is gauged by the age a person dies and the amount of accrued Social Security credits.
If you were born before Jan. 2, 1954, when you reach full retirement age, you can opt to receive your spousal benefit, and delay taking your own—which would allow your monthly benefit amount to continue to grow. “Your purchasing power will be much more by the time you reach your 90s” if you let your benefits grow, Eisenman Pell said.
Because there are so many factors involved, making the right financial decision on when to start taking Social Security benefits is complicated. Consulting with a professional financial advisor and using a Social Security calculator can help you decide which strategy best suits your personal situation.