I must confess: When it comes to when I'll claim my Social Security benefits, I'm torn. There are good reasons to turn on the spigot early (you can start as soon as age 62) and good reasons to delay.
Still, all things considered, I think there's a good chance I'll opt for earlier rather than later. Check out my reasoning below and see what you think -- you may want to follow suit or delay.
Image source: Getty Images.
1. I'm coordinating with my spouse
I'm married, and married folks would do well to coordinate a Social Security strategy with their spouse. For example, it can make sense for the lower earner to start collecting earlier if you two need the money, while the higher earner tries to delay until age 70. That way, when one dies, the survivor will be able to collect a maximized benefit.
In my marriage, I'm the low earner. So if we need income sooner, I may start collecting my benefits sooner.
2. Future benefits might shrink
For many decades, Social Security took in more from taxes on workers' wages than it paid out to beneficiaries, resulting in a surplus for Social Security's coffers. But people are living longer these days, and many are retiring earlier, and so the ratio of cash inflows to outflows has been shrinking.
The surplus is shrinking, too, and if nothing is done to strengthen Social Security, its trustees estimate that beginning in 2035, beneficiaries will receive only 83% of what they're due. Yikes. Fortunately, there are a bunch of ways to fix Social Security's problem.
3. Social Security may be weakened further
More than a few ways to strengthen Social Security have had bipartisan support, but it's looking like the current administration's proposals regarding Social Security could lead to insolvency happening sooner than 2035.
This is discouraging to me, as I'd hoped to retire within the decade. The shaky current state of Social Security is reinforcing the importance of having other income streams in retirement. I have already been adding dividend-paying stocks to my portfolio and am thinking about fixed annuities, too.
The best reason to start receiving Social Security early
My personal decision isn't yet made, but I'm leaning toward collecting my benefits earlier rather than later. The are some solid reasons one might start early:
- You may simply need income as soon as possible.
- You may stand a decent chance of living a shorter-than-average life.
- You may want to retire early and may be able to afford to do so.
The most compelling reason to collect early is if you just really need that income.
The best reason to delay starting Social Security
What's best for me isn't necessarily best for you. So here's the best reason to consider delaying starting to collect Social Security: You'll maximize your total benefits. (This may not be true if Social Security's shortfall isn't corrected, though, or if the program is otherwise changed.)
The table shows how much of your full benefits you'll receive depending on when you claim your benefits. (Much depends on your full retirement age -- which is 66 or 67 for most retirees.)
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Source: Social Security Administration.
See? Your checks will be considerably bigger if you start at age 70. At least one study found that 57% of retirees would be best off delaying until age 70. It's worth remembering that if you start early, your checks will be a lot smaller, but you'll receive many more of them, so the difference isn't quite as stark as it may seem.
Whatever you do, don't leave your future financial security up to chance. Start learning more about Social Security and other retirement topics and forming a solid retirement plan.
