There are a lot of factors that go into deciding when to begin claiming your Social Security benefits. You will need to consider your personal health, financial standing and other things. Waiting to access benefits will increase your monthly payments down the road and taking them early will decrease the money you receive. But, full access will depend on your birth date and some people may want to access benefits sooner. Continue reading to help you better navigate this issue. We’re examining some of the variables that could impact when you decide to begin claiming your Social Security benefits.
Should You Wait?
You can begin claiming Social Security benefits as early as age 62, but full retirement benefits will only be available once you reach your full retirement age, which is determined by your birth date.1 Any benefits received before reaching full retirement age are reduced by a percentage that ranges between 25 and 30. This amount is also determined by your date of birth.1
According to the Social Security Administration, this percentage reduction is often permanent. This means if you were to begin receiving benefits at age 62, the decreased Social Security benefit amount would remain constant, even after reaching full retirement age.2 If you chose to wait longer than the full retirement age to access Social Security benefits, you would receive a retirement credit, a bonus percentage determined by how long you waited, up to a maximum age of 70.2
Is It Taxable?
It is possible for your Social Security benefits to be taxed. This may happen if the total of half your Social Security benefits plus any additional income is greater than the IRS’s base amount for your tax filing status.3
The current base amounts are:3
- Single or Head of Household: $25,000
- Married Filing Separately: $25,000
- Married Filing Jointly: $32,000
One important note regarding married couples who file jointly- all taxable income earned by both spouses must be counted, even if only one spouse has started receiving Social Security benefits.
How Long Will You Live?
If you have health conditions or a lower life expectancy it may benefit you to begin receiving your Social Security benefits early. Doing this will provide you with a steady source of income earlier, which could also be a great benefit if you are no longer working and lack other income sources in retirement.
Alternatively, if you or your spouse have a family history of longevity and face few health problems, it may be more beneficial to hold off on collecting Social Security benefits until full retirement age as you will receive a larger benefit amount.
Should I Invest It?
The largest benefit of waiting is clear, more money. But for some people, beginning Social Security benefits early could bring an even greater advantage. Investing Social Security funds has the potential to bring a greater return, as long as the benefits of the investment outweigh the loss from accessing Social Security early.
There are a lot of variables to consider when making this move, so if this is something you are considering, be sure to talk with your financial planner or investment advisor first.
Should I Continue Working?
If you want to, you can continue to work past your full retirement age. In fact, working longer can have a positive impact on the total amount you receive in Social Security benefits as they are based on your income.2 Be sure to consider tax implications with this route, as a greater income may bring greater tax implications.
Keep in mind, your monthly benefits could be reduced if you work and collect benefits before full retirement. They could also be reduced if you earn over a threshold. The reduced amount, however, is calculated back into your benefits once you reach full retirement age.4
Considering everything above, when you elect to begin receiving Social Security benefits will depend on your personal financial circumstances. For the best guidance, you should work with your financial advisor to examine your options and determine the best course of action for your specific set of circumstances.