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Here's How to Maximize Social Security for Your Lifetime

By Diane Mtetwa - May 14, 2021 at 5:35AM

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How long you live could be a major decider in when you should take Social Security.

When you take Social Security is a big choice that you will be faced with. And that decision could affect how easily you can cover your bills in retirement. 

But when you take this benefit could also affect how much you get in lifetime income from the system. Before you decide which age is best for you, make sure you consider these things. 

Mature woman pulling a pink blindfold off her eyes.

Image source: Getty Images.

How Social Security works

Everyone has a full retirement age (FRA) based on the year that you were born. If it's between 1943 and 1954, your FRA is 66. If you were born in 1960 or after, your FRA is 67, and if you were born in between, your FRA will lie between those ages.

If you wait until this age, you will receive your standard benefit. But you can take Social Security as early as age 62 or as late as age 70. For every year that you take it early, your benefit gets reduced, and for every year that you delay it, you receive a pay increase. But when you take it could yield you more than just a lower or higher monthly amount -- it could also be a huge factor in whether or not you maximize this benefit. Here's how. 

If your FRA is age 66 and the benefit you'll receive at that age is $2,500 per month, your reduced benefit at age 62 will be $1,875, and your delayed benefit for waiting until age 70 will be $3,300. If you live to age 75, you will get $292,500 over your lifetime if you take it at age 62, $270,000 if you take it at age 66, and $214,500 if you take it at age 70.

If your life expectancy increases to age 80, you'll get $405,000 if you take it at age 62, $420,000 if you take it at age 66, and $396,000 if you take it at age 70. If you live to 85, it's $517,500 if you take it at age 62, $570,000 if you take it at age 66, and $594,000 if you take it at age 70. 

What makes the most sense for you

If you live a shorter life, taking your benefit early gets you the most income. If you live longer, you'll get the most out of taking it later. Although figuring out how long you will live is not easy, there are some guidelines you can use that can help you make the best guess possible.

If you have a family history of longevity and close family members who have bypassed the average life expectancy of 77.8, there could be a good chance that you will too. Your general health will also play a role in how long you could live. And if you are in relatively good shape, you may have a higher probability of a long life than if you have serious health conditions. 

Control what you can 

While your life expectancy can help you maximize this benefit, when you take Social Security may ultimately be decided by when you need it. But there are some things you can do to control having to take it unexpectedly for expenses. 

Saving more money could make delaying this benefit and living off your retirement assets easier. If you plan on taking 4% from your retirement assets, saving an additional $562,500 could help you generate the $22,500 that you would get from taking Social Security at age 62. If you can save $5,500 extra each year for 25 years and earn 9% on average, you could achieve this goal. If you have more time, you can do it with even less money each year or a more conservative rate of return. 

You could also consider working longer so that taking this benefit later is possible, or working just enough to provide you with the $1,875 each month that you would get from an early Social Security benefit. If you could do this for four years until your FRA, you could secure $625 in extra income each month, and if you did it for seven years, your monthly Social Security payments would increase by $1,425. You could also try cutting your expenses, creating other income sources like dividend income, or some combination of these strategies. 

There is no right or wrong answer for when you will take Social Security. But there is an optimal age that you can take it if you want the most income over your lifetime. The earlier you think about what age is best for you to start your benefits, the better you can plan for it.

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