When to Take Social Security Benefits

UPDATED: April 20, 2022

One of the most commonly debated questions surrounding retirement planning is when to take social security benefits. Unfortunately, given the nature of personal finance, there is not a one size fits all answer. 

Everyone has their own set of unique circumstances, and those play a key role in helping you decide when the timing is right. We’ll closely examine the reasons why some people elect to receive these benefits at 62, and why others choose to wait until their full retirement age before electing to receive any. 

When to Take Social Security at 62 

The earliest you can receive social security benefits is age 62 (unless you are on social security disability). Receiving benefits at this age would be considered an early retirement, which is a goal many people hope to achieve. 

If you are approaching this age, or just surpassed it, you may be debating if now is the right time to tap your social security. Here are the most common reasons why it may make sense to begin to receive social security at age 62. 

Plugging an Income Gap

Perhaps you’re job downsized, closed, or moved to another state. You’ve spent years working for the company and are struggling to find employment with another company that can match what you were once making.

Social security will provide you with a guaranteed income stream. Additionally, while collecting your social security benefits you can earn up to $17,640 per year through employment. This may be enough to bridge the income gap.

Health is Declining  

You just spent your entire career working and contributing to the social security system, if your health is declining, you may consider taking social security benefits early. 

The difference between 62 years old and 68 years old can have a big impact on your health. So much so, you may not be able to do some of the things you wanted to do in retirement if you waited. Taking benefits early could provide additional resources to travel the world, play golf, or coach your grandson's little league team may not be possible if you wait those extra 6 years.

The Benefit Allotment 

This is a math equation and impossible to get completely right unless you know the exactly how long you will be circling the sun. However, if you choose to receive your social security benefits early, you’ll have these benefits for a longer period of time, which can ultimately lead to receiving more money. 

Here’s an example:

Mary was born in February of 1958 and can receive her full social security benefit at 68 years old and 8 months, or October of 2024. This benefit amount would be $1,750 per month. If Mary chose to retire in October of 2020, she would receive 75% of her full benefit pay, or $1,313 per month. 

If Mary were to pass away at 77 years old, or in 2035, this is how the math would look

	Retire in 10/2020	Retire in 10/2024
Years on SS	15	11
Total Months	180	132
Monthly Rate	$1,313.00	$1,750.00
Total Benefits	$236,340.00	$231,000.00

As shown, despite receiving less money per month, Mary received social security for an additional 48 months, which allowed her to earn more total benefits. 

Family Circumstances

Perhaps your spouse’s health is declining and they need you to take care of them. Or, you have a grandchild who needs to be watched. These life circumstances come up, and when they do, some choose to retire early, thus tapping benefits. 

Personal Attitude

People often have strong feelings on the viability of the social security system. If you’re worried about losing benefits or the solvency of the program, take benefits early.  There’s no sense in agonizing over the decision if it helps you sleep better by taking benefits at 62. 

When to Take Social Security Later

The most obvious reason to wait until your full retirement age before receiving social security benefits would be so you receive the full financial allotment. 

Continuing with Mary’s example from above, there is a $437 difference between what Mary would receive retiring in October of 2020, and how much more she would receive if she waited until her full retirement year.

Need the Income 

For folks who are still paying off their mortgage, a car payment, or their child's wedding, this extra monthly income can be vital to supporting their lifestyle in their retirement years. Without receiving the full social security benefit, they would not be able to pay for their monthly expenses and may need to work part time to make their ends meet.

Life Expectancy 

Above, we reviewed how if Mary chose to take social security early, and passed away at 77 years old, she would actually receive more total benefits over the lifetime of benefit usage. 

However, this math moves in the other direction if you happen to live for a longer period of time. Here’s how the math would look if Mary lived until 85 years old. 

	Retire in 10/2020	Retire in 10/2024
Years on SS	23	19
Total Months	276	228
Monthly Rate	$1,313.00	$1,750.00
Total Benefits	$362,388	$399,000

As shown, there is roughly a $37,000 difference between the amount Mary would receive if she retired now, and what she would receive if she waited until full retirement. 

Financial Planning

Financial planning is the foundational piece that supports long-term life goals, such as when, and how much money you need to retire. You may also want to find a retirement-friendly state to live out your golden years. The earlier you get a jump start on planning for retirement, the more equipped you’ll be to navigate these difficult retirement questions.

What You Need to Know 

When it comes to retiring, there is certainly not a one size fits all approach. Everyone has their own life circumstance, financial goals and obligations. There are many reasons and benefits why one may choose to get a jump start on their golden years and take an early retirement. Perhaps you want to live the golden years with a better quality of life. Or, you may be looking to bridge any income gap you may have. 

However, there are also supporting reasons why it makes sense to wait until your full retirement age before you receive any social security benefits. If you expect you’ll need the extra monthly income in the later years of your retirement, waiting until full retirement age can put an extra 25% in your pocket each month. 

The decision on what to do is a personal one, and must factor in numerous variables such as quality of life, cost of living, and the various goals/aspirations one wants to achieve. The sooner you start planning for retirement, the easier it becomes, so get started today!