Close to 90% of Americans commence social security before their full retirement age. There are a multitude of reasons that can affect when you choose to receive benefits – some involuntary; for example a current financial need or health issue. Perhaps you’re simply of the camp hoping to “take it while you can!” Based on when you begin benefits, and whether you’re working at the time, your benefit amount can be impacted in the following ways:

  • If you take social security early, you are permanently reducing your benefit. Commencing benefits between age 62 and full retirement age (66 if you were born before 1954), will permanently reduce your benefit by 6.67% per year.
  • If you begin benefits before full retirement age and are working, your benefits will be reduced by $1 for every $2 earned above $16,920 in 2017. The year in which you reach full retirement age, your benefits will be reduced by $1 for every $3 earned above $44,880.
  • If you delay receiving your benefits following full retirement age, your benefit increases by 8% per year, until age 70. This is one of the few times you can guarantee growth! If you’re able to delay benefits until age 70, you will receive 132% of your full retirement benefit.

When weighing these considerations, you must keep in mind your ability to “breakeven”. You have to live long enough to recoup the cumulative benefit received by waiting. Keep in mind your health and the longevity of your family members.

If you do have health and longevity on your side, you must also have the financial capacity to fund your living expenses while delaying your benefit. This could mean withdrawing from your IRA or 401(k), in which you lose out on future tax-deferred growth.

This decision should be made in conjunction with a review of your financial plan, and a discussion surrounding your goals, cash flow and expectations for the future. Please contact us if you’d like to explore this decision further.