When to take Social Security retirement benefits isn't a one-answer-fits-all thing. That's the primary reason the Social Security Administration allows people to take their monthly benefit as early as age 62, or as late as age 70. And while the monthly benefit goes up the longer you delay taking it, if you live an average life expectancy, you'll end up collecting pretty much the same amount of cash.
We asked three of our regular retirement and investment planning contributors to weigh in on this topic. And while when they are planning to take Social Security may not be the right answer for you, a look at their thought process, and the factors that will play a role in their decision should give you some insight into the things that you should consider before you start collecting Social Security.
Selena Maranjian: When do I plan to start collecting my Social Security benefits? Well, my answer is ... it depends.
When I first started thinking about the issue, I figured I'd hold out as long as possible. My full, or normal, retirement age is 67, and if I delayed starting to collect until age 70, I could receive checks that were 24% fatter -- gaining about 8% per year of delay. The idea of bigger checks was very compelling. I then realized, of course, that while checks starting at age 67 would be smaller, there would be a lot more of them -- 36 more, to be exact. That diminished the appeal of the bigger age-70 checks.
The Social Security Administration itself has confirmed this, noting: "If you live to the average life expectancy for someone your age, you'll receive about the same amount in lifetime benefits. It doesn't matter if you choose to start receiving benefits at age 62, full retirement age, age 70, or any age between." So if I expect my lifespan to be average, and I do, it's not worth it to wait for bigger checks. I could do well even collecting them early, starting at age 62.
What I will probably do, though, is decide later, when I'm very close to retiring -- or close to age 62. If I have ample income streams to live on, I may delay starting to collect just because there will be bigger checks for me later, and for my spouse, too. (Taking spousal strategies into account is actually very important.) If I'm feeling financially pinched, I'll start collecting early, with few regrets.
Dan Caplinger: I'm still a couple decades away from having to make a final choice about Social Security, and even though I've thought about it generally, I'll need to wait until closer to retirement age before making the best decision for me and my family.
The key question once I hit my early 60s will be the state of my health and my spouse's health. I hope to have the financial flexibility not to need benefits at the earliest possible claiming age of 62, and so I'll want to assess what my likely life expectancy is for my own retirement benefits to see if it makes sense to take smaller benefits early or larger ones late. My own family history puts life expectancy on the short side, but I'll also want to take into account my spouse's situation, because it's likely that she'll be in position to claim survivors benefits on my work history if I die before she does.
In addition, it'll be important to assess other assets and financial resources. The amount available from other sources will also affect the final decision. Overall, I would hope to wait until full retirement age or longer, but there are situations in which it would make more sense to move quickly and claim early benefits.
Jason Hall: I'll be 62 -- the earliest age to collect any benefit -- in 23 years, making me the youngster in this group. That also means I have the most time to contribute to and grow my retirement savings, and hopefully reduce my dependence on Social Security. But at the same time, taking Social Security is only one decision in the bigger scheme of retirement planning.
I'd like to start taking Social Security the first day that it, combined with my other assets and retirement savings, will give me the retirement I want. However, I also want to make sure that I have enough assets to provide for my care as I age.
According to the U.S. Department of Health and Human Services, almost 70% of people older than 65 will need long-term care at some point, and the majority of that care ends up being provided by family members. Most often, this is not because a family member is the best provider, but because it's the only affordable option. The reality is, Medicare and other health insurance plans don't pay for the vast majority of long-term care.
Because of the high cost and high likelihood that either I or my spouse will need long-term care at some point, our general health, family history, and our wealth will play a big role in deciding when to take Social Security, because it will play a role in when I decide to retire. And that will be based on much more than just what my monthly Social Security benefit will be.
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