The Tradeoff With Early Social Security Benefits

There are benefits and pitfalls to taking Social Security early. Get a balanced view of both.

Dan Caplinger
Dan Caplinger
Apr 26, 2014 at 8:45AM
Investment Planning

The hardest decision with Social Security is when to start taking benefits. One positive of taking early Social Security benefits is that you get to preserve your investment portfolio longer. But there's a trade-off you make by choosing that course for your finances.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the trade-off involved in taking Social Security benefits early. On one hand, if you take early benefits, you'll leave your portfolio to grow, and with the stock market having performed so well lately, that can look like a smarter proposition than taking money out and letting your monthly Social Security benefit get larger. But Dan notes that the question really comes down to your risk tolerance, as delaying Social Security gives you a certain return of about 8% per year on your monthly benefit, while taking early benefits to let your portfolio grow involves market risk that can either boost or hold back your total return. Dan concludes that everyone's financial situation is different, making the best choice vary from person to person.

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