Sponsor spotlight: When should you take Social Security?

Tim Schell

One of your important sources of retirement income will likely be Social Security — but when should you start taking it?

You can start collecting Social Security benefits at 62, but your checks will be considerably bigger if you wait until your full retirement age, which is likely between 66 and 67. You could even wait until you’re 70, at which point the payments will max out, except for yearly cost-of-living adjustments. But if you need the money, you need the money, even if you’re just 62 or any age before full retirement age.

However, if you have adequate financial resources to meet your monthly needs, whether through earned income, your investment portfolio or a combination of the two, you could have some flexibility in choosing when to take Social Security. In this case, you may want to weigh these considerations:

Life expectancy – For all of us, it’s one of life’s great mysteries: How long will we live? Of course, we can’t see into the future, so the question can’t be answered with total confidence. But to make an informed decision on when to take Social Security, you don’t need to know your exact lifespan — you just need to make a reasonably good estimate. So, for example, if you’re approaching 62, you’re enjoying excellent health and you have a family history of longevity, you might conclude it’s worth waiting a few years to collect Social Security, so you can receive the bigger payments. Conversely, if your health is questionable and your family has not been fortunate in terms of longevity, you might want to start taking your benefits earlier.

Employment – You can certainly continue working and still receive Social Security benefits. However, if you’re under your full retirement age for the entire year, Social Security will deduct $1 from your benefits for every $2 you earn above the annual limit of $22,320. In the year you reach your full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above $59,520. So, you may want to keep these reductions in mind when deciding when to begin accepting benefits. Once you reach your full retirement age, you can earn any amount without losing benefits. (Also, at your full retirement age, Social Security will recalculate your benefit amount to credit you for the months you received reduced benefits because of your excess earnings.)

Spouse – Spouses can receive two types of Social Security benefits: spousal and survivor. With a spousal benefit, your spouse can receive up to 50% of your full retirement benefits, regardless of when you start taking them. (Your spouse’s benefit can be reduced by the amount of their own retirement benefit and whether they took Social Security before their full retirement age.) But with a survivor benefit, your decision about when to take Social Security can make a big difference. A surviving spouse can receive the larger of their own benefit or 100% of a deceased spouse’s benefit, so if you take benefits early and receive a permanent reduction, your spouse’s survivor benefit may also be reduced for their lifetime.

When to take Social Security is an important — and irrevocable — decision. So, consider all the factors before making your choice.

— By Tim Schell
Financial Advisor, Edward Jones

Address: 1300 Olympic View Dr., Edmonds
Website: www.edwardjones/com/tim-schell
Phone: 425-775-7817
Email: tim.schell@edwardjones.com

  1. If I worked or live long enough to get maximum payout it still wouldn’t be enough to pay rent on a apartment. Going to be a lot of people that have to work until they die

  2. Yes, taking SS earlier gives you smaller checks…. BUT you’re still getting checks, where as if you wait, you’re getting ZERO. From 62 to 67 is 5 years, or 60 months of ZERO payments. For example, if my monthly payout at 62 is $2000 / month, by the time I reach 67 I will have received $120,000 that is NOT in my pocket if I chose to wait. If i start collecting at 62 instead of 67, I will be $$ ahead till I reach 84 – I ran the numbers based on the SS website estimator. After the age of 84, the higher monthly payments overtake the earlier lower payments. (in my case). Thus, the real questions are; do I have a life expectancy in excess of 84? And What is the value of the money to me now?

    1. Great points, Bill. Social Security claiming strategies require the calculation of that “Crossover” point considering longevity, and the time value of money today. The average life expectancy in the US is 78 years. Figuring out the proper strategy, considering all other income sources is important.

  3. Another reason to take Social Security as soon as possible is as simple as inflation. Dollars now are virtually always worth more than dollars of the future. Take the money, even if you don’t really need it and invest it wisely in something that might keep up with the inflation rate. You would probably be money ahead, especially if you live past 84. Jim is absolutely right too, millions of people living today will never be able to retire let alone buy a home, especially if they think SS is going to take care of them. The ultra rich we keep making richer with our screwed up regressive taxation schemes don’t ever want to fund your retirement and they don’t ever want you to retire. Everybody I’ve ever known who had quite a bit of money already are the first to be sure they get in line for THEIR S.S. payout, so the “lowlifes” don’t get it all.

  4. Thanks for the article Tim!
    Bill and Clinton you both make excellent points. I elected to take SS at 62 and invest in dividend paying stocks and an Ally savings account currently paying 4.35% interest monthly. I am far ahead what I would have received by waiting for a bigger check. I am also fortunate that I receive a pension which affords me that option.
    The point is you can invest the money any way you want rather than wait.
    Everybody’s financial situation is different of course but like Bill has pointed out waiting isn’t always the best strategy.

    1. You are welcome, Matt. Financial education is so valuable and not often taught. Feel free to reach out if you ever want some ideas or a review of your strategy. Happy to help.

  5. My husband passed away veray suddenly 3 months before he was 62, just waiting wto collect SS. He paid into it all of his working years……and collecting widow’s SS was helpful but I had to go back to work just 2 weeks after his death, as we had a mortgage payment. The secret is and always has been…………invest IN AN IRA when yoy first atart working, and invested proprly, you can be a millionaire at age 60!

  6. All good comments about ” your social security money and when to take it”. Most money managers and the social security “work till your 70” drum beaters don’t show the ramifications of paying into Social Security and Medicare till you are age 70. The canary in the coal mine has been left out. Bill Smith has it right, but don’t forget, if you work till 70 you are paying your own SSI check increase for those years till you stop working and collect SSI. Example @ $100,000 W2 income, SSI/Medicare paid from your check is $7,650 per year. Work from 62 till age 70 -8 years x $7, 650 =$61,200 paid to the government. One thing in life is you cannot get time back. Just look at your parents decline in health from age 62 to 70 and their physical ability to travel and enjoy their retirement. Make the decision, which is best for you and your family, don’t look at the promise of a bigger check, you might not get to enjoy it by then!

  7. The percentage of people that have no savings is on the increase 50% of people 54 to 64 have no savings and of people over 65, 37% have no savings also the amount of debt seniors carrying is also increasing. Yes people should consider when it is best to take SS but with the average payout being less than the average apartment 1700 dollars it is becoming clear the payout amounts aren’t going to be enough to keep half of retirees from either working or spending their next check on a tent. Note the average payout is only about 2/3 of what our minimum wage is and to talk to them our minimum wage is less what they would consider a living wage. My question becomes what is government going to do to avert this coming disaster.

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