Many people consider taking Social Security benefits early.

Should you take your benefit early, or should you wait?  If you wait and have no other income, you may need to spend your retirement savings down more quickly.  It might tempt you to go ahead and decide to claim your Social Security benefit early.

But, deferring your Social Security allows you to avoid early claiming penalties.  It also incentivizes you to wait beyond your full retirement age by promising to pay an additional 8% per year deferred every year (up to age 70).

A retiree estimated to receive $1,441 per month at age 62 would receive $2533 plus any cost of living adjustments at age 70 if they waited.

Today’s retiree needs their money to last longer because people live longer than ever before in history.  A majority of Americans,57%,  continue to elect Social Security before Full Retirement Age, according to the Social Security Administration’s recently released Annual Statistical Supplement for 2018. Don’t underestimate the power of the increased amount of stable income that Social Security can offer.  Claiming early may reduce the longevity of your other retirement savings.

One good reason for delaying or using claiming strategies is an 8% increase each year plus any cost of living adjustment from your full retirement age to age 70!

For anyone born before January 1, 1954, that's a 32% increase in income.  

Due to today’s concerns with longevity and inflation, it can be in your best interest to delay claiming benefits.  For some people, spending the other money (think 401k or IRA) first can bring improvements to the overall plan.

Spending other retirement savings first may also smooth the tax burden by reducing the future value of required minimum distributions owed later in life.

One reason people claim their Social Security benefit early

People often claim their Social Security benefits early because they hate the idea of spending their retirement savings.  They do a little math and figure that the extra cash from their benefit will help make the budget complete.  However, Social Security has a powerful COLA (cost of living adjustment).  If your benefit were going to grow every year by an average of 2%, then having more of that sort of income (income that grows) can help fight the effects of inflation.  One doing a little quick math may not fully appreciate the impact without giving COLA consideration.  

We recommend looking at Social Security claiming choices inside of a complete retirement income plan.  A retirement income plan can reflect inflation.  It can also simulate when a spouse might pass away, and the Social Security survivors benefit would kick in.  To us, it's a better way to weigh the all-important decision of whether you should take your Social Security benefit early or delay it a little longer.

Be sure to visit our Social Security online class to gain a better understanding on how your benefit interacts with your retirement plan.

Social Security