If you claim your Social Security at 62, this might mean you spend less money from your portfolio of investments. However, delaying your Social Security until later means you could demand less from your investments for the long term. Yet, delay in many cases means you will likely spend much more of your investments early on. Which is better?

This is a common question, and a recent study by J.P Morgan published a chart revealing the benefits of depending on two key factors: Your estimated return on investments and how long you will live.

The graph in the study is interesting, but I think we're asking the wrong question. There are a few well-known ideas to consider, like your health, cash flow, taxes, and more. Below are a few of the typical factors to consider.

Key Factors to Consider:

Health and Life Expectancy: Personal health and expected lifespan are perhaps the most direct influencers on the decision to claim benefits early or delay. Claiming earlier could make sense if there are reasons to believe that one might not enjoy a long retirement. However, if longevity runs in the family, waiting to claim benefits could increase the monthly payout.

Spousal Survivor Benefits: The impact on a surviving spouse must be considered. Maximizing the survivor benefit can provide essential financial security for the remaining spouse.

Earned Income: For those still working, starting Social Security benefits too early could reduce benefits due to the earnings test.

Inflation: Social Security benefits include Cost-of-Living Adjustments (COLA), which help protect against inflation. Understanding how COLA works is critical in planning when to take benefits.

Taxes: The interplay between Social Security benefits and taxes can be complex. Benefits may be taxable depending on other income sources, affecting the net benefits received.

Economic Policy: Lastly, staying informed about potential legislative changes to Social Security rules is necessary, especially for those close to retirement age.

I think the most important factor to consider isn't even listed above, and that is, what happens if our country goes through difficult times during your retirement? How would having more Social Security benefits help you in dire situations such as the stagflation of the early 1970s?

Determining the best time to claim Social Security benefits is a multifaceted decision beyond simple financial calculations. It requires a holistic approach, taking into account personal circumstances, financial goals, and the broader economic landscape.

If you found this information helpful and want personalized guidance for your retirement and wealth management, reach out to Nick Davis, a Certified Financial Planner (CFP) in the Dallas-Ft. Worth area. Nick specializes in retirement planning, 401k rollovers, IRA rollovers, and self-directed IRAs. As a fiduciary and a trusted financial advisor, he's here to help you make the most of your financial journey.

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