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When Should You Take Social Security?

The answer depends on your unique financial situation. 


One of the questions I hear most often from people approaching or already in retirement is, "When should I start taking Social Security?" For a lot of people, Social Security funds the bulk of their retirement. How and when you decide to take your benefits is one of the biggest decisions you will need to make, and it's not always a simple answer. Ignore the water cooler talk, ignore what your "smart friend" says, and focus on taking an objective look at your own situation. While your friends may have made a perfect decision for themselves, your situation is most likely different.

First, take an objective look at your health and family history. Are you in good health and still active, or do you have a history of health problems? What kind of longevity do you see in your family? Keep in mind that modern medicine is continuing to advance, which could increase your life expectancy. That means if your family had a history of making it till their mid 70s, you very well may make it till your mid 80s or longer.

If we all knew the exact date we would pass away it would make this decision much easier. For better or worse though, we don't, so we'll have to make our best guess. One way to get a general idea of life expectancy is to apply for life insurance. The underwriter's job is essentially to look at your history, compare it with all the latest statistics, and estimate how long you will live. Frankly, they are pretty good at their jobs, and in general, the better rating you get, the longer the life insurance company thinks you will live.

Next, think about how long you plan to work. If you take Social Security prior to your full retirement age, which is somewhere between 66 and 67 depending on your birthday, and you are still working, your benefits may be reduced based on how much you make. After you reach full retirement age you are free to earn as much as you like without your benefits being reduced.

Third, what retirement assets do you have saved, and can you afford to live off of them for a while without Social Security? Every year you defer taking Social Security, your benefit grows by about 8 percent. Depending on the assets you have saved for retirement and how long you expect to live, it sometimes makes sense to live solely off your nest egg for a few years and let your Social Security benefit grow.

Lastly, are you married or single? This adds another layer of complication to the Social Security equation. In addition to the considerations outlined above, you now need to think about what your individual benefit will be, and what a spousal benefit will be. Will you both take Social Security early, at full retirement age, or at 70? Does one spouse take theirs early and let the other's benefit grow? Which one should be taken early and which should be delayed?

These are just a few of the considerations we look at when answering questions about Social Security, and unfortunately, since there are so many variables, there is no one-size-fits-all answer. Please, talk with our team and let us help you weigh your options before making a decision. The choices you make could impact you by hundreds of thousands of dollars over the course of your retirement.

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