Hello there!
I’m Elisabeth Dawson, a financial advisor and retirement income planner based in San Diego. With over 26 years of experience helping clients navigate the complexities of retirement planning, I’ve seen firsthand how the decision of when to start collecting Social Security benefits can significantly impact your financial future.
As you approach retirement age, one of the important questions you’ll need to answer is when to claim Social Security. Should you start receiving payments at 62, the earliest possible age, wait until your Full Retirement Age (FRA), or even delay until 70? This decision has significant implications for the income you will collect over your lifetime (and potentially that of your spouse). That’s why I’m going to help by laying out the pros and cons of each option.
In this article, I’ll share my insights and help you understand the factors to consider when making this important choice. I’ll also provide some personal anecdotes and real-life examples to illustrate the potential benefits and drawbacks of each option.
Whether you’re already retired or still a few years away, I hope this article will help you make an informed decision about when to claim Social Security and ensure a more secure and fulfilling retirement.
Let’s get started!
Understanding the Basics: What Are Your Options?
Starting Social Security at Age 62
I understand why many people are tempted to start taking Social Security as soon as they turn 62. You’ve worked hard all your life, and the idea of finally receiving those benefits can be very appealing. However, it’s essential to weigh the benefits and drawbacks before making this decision.
The Appeal of Starting Early
One of the biggest advantages of taking Social Security at 62 is that you can start receiving money right away. This can be incredibly helpful if you’re facing financial challenges or if continuing to work isn’t feasible for you due to health reasons or job availability. I’ve seen clients who, after decades of contributing to Social Security, are eager to start enjoying the fruits of their labor as soon as possible. And who could blame them?
Moreover, starting at 62 means you’ll receive benefits for a longer period. If you’re someone who values getting the most out of what you’ve paid into the system, this might seem like the best route.
The Downsides of Taking Social Security Early
However, there’s a significant downside to starting your benefits at 62 that you need to be aware of. When you claim Social Security before reaching your Full Retirement Age, your monthly benefits are permanently reduced. For some, this reduction can be as much as 30% of the full benefit amount. That’s a substantial difference and something that could affect your financial stability in the long run.
Let’s say you decide to keep working after you start collecting Social Security at 62. If your income exceeds the annual limit set by the Social Security Administration, your benefits may be reduced further. While you may get some of this money back later, it could make your early retirement years financially tighter than you anticipated.
Waiting Until Full Retirement Age
Waiting until you reach your Full Retirement Age (which is between 66 and 67 for most people) can be a more balanced approach, and it’s one we often discuss with our clients.
The Benefits of Waiting
When you wait until your FRA, you’re entitled to your full Social Security benefits without any reductions. This can make a significant difference in your monthly income, which in turn can help you maintain the lifestyle you’ve envisioned for your retirement. We’ve found that clients who wait often feel more secure, knowing they’re receiving the maximum benefit they’re entitled to.
Another important point is that, once you reach your FRA, you’re no longer subject to the earnings limit. This means if you choose to continue working, you can do so without worrying about your Social Security benefits being reduced. For many, this flexibility is a key factor in deciding to wait.
The Potential Drawbacks
Of course, waiting until your FRA means you’re delaying the start of your benefits. If you need the income sooner, or if you’re concerned about your health and longevity, waiting might not be the best option. It’s also worth considering the “opportunity cost” of not receiving benefits for several years—money that could have been used to enhance your quality of life during those years.
This is where we can often help our clients by exploring other options to satisfy the income they need before they’ve reached FRA. If we can show them how to structure other assets to create income, they may be able to delay claiming Social Security in order to maximize their benefits in the long-run.
Delaying Social Security Until Age 70
Now, let’s talk about the option of delaying your Social Security benefits until age 70. This is a strategy I often recommend to those who are in good health, have other sources of income, and want to maximize their benefits.
The Rewards of Delaying
For every year you delay taking Social Security past your FRA, your benefits increase by about 8%. By the time you reach 70, your monthly payment could be up to 32% higher than it would have been if you’d started at your FRA. That’s a significant increase, and it can provide you with more financial security, especially in your later years.
This strategy can also be beneficial for married couples. By delaying the higher earner’s benefits, you ensure that the surviving spouse will receive the larger benefit amount after the first spouse passes away. I’ve seen how this can make a real difference in the surviving spouse’s quality of life.
We help our clients plan for longevity so this is part of conversations we have all the time. When we map out a couple’s income over their lifetime, and even beyond for the surviving spouse, it provides tremendous clarity and helps with making informed financial decisions.
The Considerations
However, delaying until 70 isn’t for everyone. You’ll need to have sufficient savings or income to cover your expenses until you start receiving Social Security, which can be a challenge for some. There’s also the risk that you might not live long enough to fully enjoy the higher benefits you’ve delayed for. This is why it’s crucial to consider your health and life expectancy when making this decision.
Making the Right Decision for You
I understand that deciding when to take Social Security is deeply personal and can feel overwhelming. To help you make the best choice, here are a few questions you might want to consider:
- What is your current financial situation? Do you have enough savings or other sources of income to support yourself if you decide to delay Social Security?
- How is your health? If you have health concerns, it might make more sense to start taking benefits earlier.
- What are your retirement goals? Think about the lifestyle you want to maintain and how Social Security fits into that picture.
It’s also important to remember that Social Security is just one piece of your retirement puzzle. How it fits into your overall financial plan, including your savings, investments, and other income sources, is something my team and I are here to help you figure out.
Balancing the Pros and Cons
I’ve guided clients through these decisions, and there’s certainly no one-size-fits-all answer. The right decision depends on your unique circumstances, and it’s essential to weigh the pros and cons carefully. Whether you choose to start taking Social Security at 62, wait until your Full Retirement Age, or delay until 70, understanding the implications of each choice will empower you to make the best decision for your future.
Remember, the goal is to ensure that your Social Security benefits contribute to a secure and fulfilling retirement. By taking the time to explore your options and consider how they fit into your overall financial plan, you can feel confident in the path you choose.
Plan for Your Future
Don’t let uncertainty over when to claim your benefits become a burden. The Copia team is here to support you every step of the way. Together, we can navigate the complexities of Social Security and create a retirement that truly reflects the life you’ve worked so hard to create.
Let’s work together to:
Let’s work together to:
- Assess your current financial situation.
- Determine your wishlist and retirement goals.
- Develop a personalized Social Security claiming strategy.
- Create a comprehensive retirement income plan.
Schedule your complimentary consultation here or contact my team at Copia Wealth Management and Insurance Services by calling (619) 640-2622.
