When should you take Social Security? There's no right or wrong answer, but one of them is the best time for you. The age when you activate this benefit will determine how much you receive monthly -- which could greatly impact how much of your working income gets replaced.
The age at which you start will also play a role in how much you get in total benefits from this system during your lifetime. And if you're looking to hedge your bets on how long you might live, then taking benefits at your full retirement age may be in your best interest.
How does your age impact your benefit?
If you take Social Security at your full retirement age (FRA), you'll receive your standard benefit. But you can take it as early as age 62 or delay it until age 70. If you take it early, you'll receive less for every year that you take it sooner, and you'll get an increase in your benefit for every year that you delay it. So if your standard benefit at your FRA at age 66 is $2,500, your reduced benefit at age 62 will be $1,875 and your delayed benefit at age 70 will be $3,300.
If you live to the age of 75, taking it at age 62 will get you $292,500 in lifetime income. If you take it at age 66, you'll get $270,000, and if you delay to age 70, you'll get $198,000. If your life expectancy extends to age 80, you'll receive $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 until the age of 85, you'll draw $517,500 in lifetime income if you take it at age 62, $570,00 from taking it at age 66, and $594,000 if you take it at age 70.
Which age makes the best choice?
How long you could live plays a major role in whether or not you should take it early or late. The shorter your life expectancy, the more taking it early makes sense, while the longer you expect to live, the more you should consider taking it late.
But figuring out how long you'll live is difficult. Things like being in good health and a family history of longevity can give you a better idea, but it will still be an estimate.
If you live to the age of 75 and take your Social Security benefits at age 70, the difference between taking it at age 62 and this later age is $94,500. But if you took it at age 66, that difference in the total income would only be $22,500. If you live to the age of 85 and take your benefits at age 62, the difference in lifetime income that you would receive between taking it at age 70 or 62 would be $76,500. But it would decrease to only $24,000 over your lifetime if you took it at age 66.
If you're uncertain about how long you could live or don't want to guess, taking Social Security at your FRA could be your best bet. If you're wrong, you won't get the most in lifetime income but you could reduce the amount that you miss out on.
When you take Social Security may be completely determined by when you need it, regardless of how long you could live. But if you don't have immediate financial needs that dictate that you have to take Social Security as soon as possible, maximizing how much you'll get will involve taking a look at life expectancy.
Taking Social Security at your FRA will ensure that you get your standard benefit. And when faced with the unknown, it could strike the right balance between taking it too early or waiting too long.