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When should I start taking Social Security benefits?

Social Security timing is an important decision for retirees. The right time to start claiming Social Security depends on many factors in your life and in your financial plan. You can claim Social Security as early as age 62, but that is usually not advisable as this may reduce your benefit by up to 30%. And once you file early, you are permanently locked into the lower benefit. Waiting till at least your Full Retirement Age (FRA) is better under many circumstances. For every year after your FRA till age 70, you will receive an 8% increase in your benefit which may be a substantial increase in your income.

Here are some of the factors to consider:

  1. Health - If you have poor health or family history that may predispose you to certain illnesses, taking Social Security may make sense. However, if you have a reasonable expectation of longevity, postponing may provide a key source of income.

  2. Length of Employment - Claiming Social Security prior to FRA is normally not advisable if you are still working. Again, your benefit may be reduced by up to 30% and, in 2022, if your earned income is above $19,560, your Social Security benefits will be reduced by $1 for every $2 earned over the limit. Once you reach FRA, you may still earn any amount of income and still receive your full Social Security benefit. If you are not earning any income and do not have sufficient financial resources, taking Social Security early may be the only feasible option.

  3. Balance Sheet - Your financial resources and how they are structured may impact the Social Security timing decision. If you have substantial assets that can be used to fund expenses in a tax-efficient matter, delaying Social Security may be feasible even if you retire prior to FRA. If you do not have adequate liquid financial resources or your balance sheet is comprised almost exclusively of tax-deferred accounts, delaying Social Security may not be advisable.

  4. Marital Status - Your marital status is an important factor. If you are married, reviewing Social Security options in context of spousal benefits is important. Depending on the Social Security benefit amount, it may be beneficial for one spouse to take benefits at FRA and the other to delay till age 70. Analysis should also be run for widowers and divorcees to determine if there are any additional Social Security benefits that may apply.

When should you start taking Social Security? It depends! A qualified financial advisor may be able to help. We encourage you to find a guide.

Important Disclosures:

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