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5 Signs You're Ready for That First Social Security Check

By Robin Hartill, CFP® - May 18, 2021 at 8:15AM

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This could be your year to claim benefits if these five things apply.

Deciding when to take your Social Security checks is nerve-racking for obvious reasons. For one thing, you have to think about your mortality to make the optimal choice. Plus, once you've started benefits, it's tough to reverse your Social Security decision.

Are you thinking 2021 could be your year to start taking Social Security benefits? Here are five signs that the time is right.

A senior man parties with Champagne.

Image source: Getty Images.

1. Your investments can outpace inflation

Anyone who's relying on Social Security cost-of-living adjustments (COLAs) to counter soaring inflation is in for a rude awakening. Between January 2000 and March 2021, the typical senior's expenses rose by 101.7%, according to The Senior Citizens League's 2021 Social Security Loss of Buying Power Study. In that same period, Social Security COLAs increased benefits by just 55%. 

If you're planning to take Social Security this year, make sure you have a plan to increase your annual income that doesn't rely heavily on your COLAs. For example, investing in dividend stocks or real estate investment trusts (REITs) can be a good way to generate extra passive income.

2. You can replace 80% of your pre-retirement income

A good rule of thumb for financial planning is to replace about 70% to 80% of your income in retirement. Replacing just 70% could make for a pretty threadbare retirement, particularly if inflation soars.

But if your investments and Social Security benefits can get you to 80% or more, you've left some decent wiggle room in your retirement budget. You can probably take benefits now, even if waiting could earn you a bigger benefit. 

3. You're 66 and plan to take spousal benefits

When you take Social Security based on your own record, you get the biggest benefit by delaying until 70. But that's not the case when you're taking spousal benefits based on your current spouse's earnings or a divorced spouse's record.

You can only receive up to 50% of their primary insurance amount. But you can't earn extra delayed retirement credits of 8% per year for holding out past your full retirement age.

If you're 66, you're either at full retirement age or it's rapidly approaching. Since you'll reach your maximum benefit at full retirement age, plan to claim soon as long as your spouse has already claimed retirement benefits.

4. You've paid off your debt

If you've paid off your mortgage and any other debt, you've probably managed to get your expenses pretty low. In that case, it's likely that you've bought yourself some flexibility on when to take benefits. Starting benefits now instead of later may make sense if you don't have to stretch those checks too far.

5. You need the money

The most obvious reason to take Social Security benefits is that you need that money because you've retired by choice or left the workforce for reasons beyond your control. If not taking Social Security would leave you unable to pay your bills, put you into debt, or force you to skimp on important medical care, you can't afford to delay. This is your year to take Social Security.

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