This year has been tough for nearly everyone, with stock prices falling and inflation surging. Many people are also concerned that a recession is looming, which could spell trouble for those on the verge of retirement.
If this economic uncertainty continues into 2023, is it still the right time to start taking Social Security benefits? Or should you hold off? It depends on a few factors.
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How strong are your savings?
Your savings will be one of the most important factors to consider when deciding whether you should start claiming benefits. If a recession is on the horizon, the stock market could potentially fall further -- which may affect your retirement savings. If money will be tight in retirement, a market downturn could exacerbate that problem.
Social Security can provide a secondary source of income, but it may not go as far as you think. While seniors will receive a historic cost-of-living adjustment next year, the average retiree will only collect around $22,000 per year from Social Security in 2023.
That money can go a long way if your savings are falling short, but with quickly rising costs, it may be tough to survive primarily on your benefits in retirement.
Why it may be smart to claim in 2023
If you have a robust retirement fund that can weather a market downturn, there may be no reason you can't take Social Security in 2023. Your savings might take a hit in the short term, but that may not make a significant difference in your overall strategy if you have plenty stashed away.
Claiming Social Security soon could also be smart if you're forced into retirement. If you lose your job or develop health issues and can no longer work, you can still hold off on taking benefits if you choose to. But that means you'll need to rely more on your savings in the meantime.
Again, if you have plenty of savings, this may not be a problem. But market downturns typically aren't the best times to withdraw money from your retirement fund because stock prices are lower and you may end up selling your investments at a loss.
This may be unavoidable to some degree. However, if you start taking Social Security, you can minimize the amount you have to withdraw from your savings, which can help your money last longer.
Which is the best option for you?
If your savings are falling short and you have the option to work longer, holding off on Social Security may be worth considering. Not only will this help you avoid withdrawing your savings during a market slump, but by delaying benefits, you'll also earn larger checks each month. However, if you have no choice but to retire soon or if you have a strong nest egg, taking Social Security in 2023 could be a smart idea.
There's not necessarily a right or wrong time to begin claiming benefits, but it's important to consider how a potential recession or stock market downturn could affect your choice. With the right strategy, you can make the most of Social Security and head into retirement as prepared as possible.
