Deciding when to take Social Security retirement benefits may be one of the biggest financial decisions you will make in retirement. Though you can start benefits as early as age 62, your benefit will increase every year you delay, until you reach age 70. To make an informed decision, start by understanding the basics of Social Security, how much you can expect to receive, and the pros and cons of starting benefits at different times.
Basics Of Social Security Benefits
Generally, you are eligible to receive Social Security retirement benefits if you’ve worked for a total of 10 years throughout your life before claiming the benefits, earning a total of 40 “credits.” Each year you work and pay into Social Security through your taxes means you earn at least a minimum of four credits.
You can begin claiming benefits at age 62, though you will collect less money than if you wait until “full retirement age,” which the Social Security Administration says is 66 or 67, depending on your year of birth. At that age, you can receive your full benefits. But if you’re able to wait even longer, until age 70, you will receive the maximum benefit amount. Currently, the average monthly Social Security retirement benefit is about $1,467. (1)
Though Social Security likely won’t fund all your retirement expenses, the benefits are valuable in supplementing other sources of income because they increase over time based on inflation, and last as long as you live.
Note that if you choose to claim benefits before full retirement age and you are still working, your benefits may be reduced once your income hits a certain level. Visit the Social Security website to learn more.
Why Wait To Claim Benefits
I recommend to many of my clients that they wait to claim benefits if they are financially able, or are able to keep working well into their 60s. Your benefit can increase an additional 8% each year past your full retirement age. That can make for a significant bump in your monthly check. For example, a person who began claiming at age 62 in 2002 would now, in 2020, be receiving about $2,021 a month, according to Social Security. If that person waited until 2020 to begin claiming at age 70, they would currently be receiving $3,790 a month, (2) a nearly $1,800 monthly difference!
For some of us, claiming sooner will make sense. Perhaps you’ve lost your job and will have to retire sooner than expected and need to fill that gap in income. If you have health problems, claiming earlier may make sense for you. Also, delaying your claim means that your ultimate benefit will be larger, but by doing so, you forfeit several years of receiving benefits.
If you’re married, coordinating the beginning of benefits is more involved, especially if one spouse was the primary breadwinner. The Social Security website is a wealth of information on this and other topics. An experienced financial advisor who has advised other retirees can also be a valuable resource.
Making Your Social Security Decision
Deciding when to take Social Security can be a complicated decision. The process should also take into account your other retirement accounts and pensions, and your expected expenses in retirement. But you don’t have to go it alone. We at West End Advisory Group can have a preliminary discussion with you to review your retirement plan and see where Social Security fits in. Set up an introductory meeting by contacting us at (314) 492-5999 or jroddy@ceteranetworks.com.
About Joe
Joe Roddy has been in the financial services industry since his early 20s. After working on financial transactions for large corporations, Joe decided he wanted to apply his skill and knowledge to meet the needs of the individual and small business owner, while at the same time creating his own business. He wanted long-term client relationships nurtured through trust that could not be developed in an environment emphasizing immediate transactions.
His founding of West End Advisory Group gave him the flexibility to build just that kind of business. Through hard work, outstanding service and a reputation of fairness and integrity, he has built a solid client base and has expanded his business through referrals.
The West End Advisory Group is a local firm but has the resources of a large national firm through its affiliation with Cetera Advisors Network—one of the country’s largest independent broker dealers. His firm’s approach is to plan before investing and uses a five-step process to customize a solution that works best for them.
In addition to his business, Joe is active in his community serving as Alderman of 17 th ward which includes the Central West End, Forest Park South East, Botanical Heights, and Kings Oak neighborhoods.
He has received numerous awards for his civic work including: Cortex Innovative Community Founder’s award for his role in its creation, Citizens for Modern Transit’s Chairman Award, Herbert Hoover Boys and Girls Club’s National Award of Merit, Central West End Association’s Renaissance Award, Shalom House’s Legacy Award for his support of the unhoused.
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(1) https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/