Many people labor over when to start taking their Social Security Benefits. Should they start immediately when eligible at age 62, and accept a reduced monthly payment, wait until full retirement age (currently 66), or even delay until age 70 and earn a larger monthly payment? In a perfect world, it would make sense to try to wait until the age of 70 in order to maximize the monthly benefit. However, we know our world isn’t perfect, and no one’s retirement is in a vacuum. This leaves us with our original question of “How long should one wait until filing for Social Security?”
Just like many other factors in your retirement plan, it depends entirely on the individual, and potentially their marital status. One major factor many people need to consider is how healthy they are at the time they are making this important choice. Since Social Security benefits are for the remaining lifespan of the individual, they have to consider how long they believe they will be alive to collect the benefit. This is called a breakeven analysis. Think of it this way: How old will you be before the total value of your higher benefits catches up with the amount you would have received had you started taking Social Security years earlier? A rough calculation shows the typical breakeven age to be about 80 1/2. Before that age, a retiree could actually receive more total money by taking their benefits earlier. This could be further compounded if the retiree invests some of those benefits, extending the breakeven age even further. Another factor to be considered is a client’s marital status. The timing of when one spouse chooses to take their benefit could have an impact on survivor benefits.
Of course, predicting one’s life expectancy is a serious and impossible task. It is, however, an important consideration when determining a retirement plan. When factoring the complexity of how you can take your Social Security benefits, it will be important to work with a qualified financial advisor that can help you. The advisors at Compass Point Retirement Planning would welcome the opportunity to help you with your retirement plan and how your Social Security benefits fit into that plan. Give us a call today!
The opinions voiced are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by IFG or F3Logic.
1 Speigelman, Rande. When Should You Take Social Security. 17 May 2016. 10 June 2017.