Taking Out Social Security

Taking Social Security before your full retirement age could end up hurting your retirement plan. We see it ever-so-often when people end up having to reduce their benefits when they really don’t need to. I only recently noticed that there’s a specific type of person who probably should not take Social Security before their full retirement age, even if they are retired, and even if they don’t think they’re going to earn an income anymore.

Are You the Type of Person Who Should Wait?

Last week we had a Zoom call with a 63-year-old couple. They sold their business and they were talking about Social Security and the strategy behind it and what’s best for them. This couple wondered if they should just start Social Security now. Here’s why we decided not to take it.

He fits that category of a certain type of person: a business owner or an entrepreneur. He’s got a lot of ideas and finds it difficult to sit still. If you’re that way, you might know what I’m talking about. The reason why we decided to wait until full retirement age at minimum is because there’s a chance that he may have an idea that turns into an income-producing idea.

Entrepreneurs and Social Security

We sometimes see that happen with entrepreneurs in retirement because the ideas that they have often end up helping other people and that’s fun for them. The great thing about retirement is that you’re retiring from your vocation or occupation, which is usually the income-producing thing, but you don’t retire from your avocation or what you do for pleasure or fun or for hobby. The way that some entrepreneurs are wired, they may find that their avocation can turn into a money-making thing.

How Do You Know?

So here’s the question that we asked to see if they should take Social Security before full retirement age, even though they didn’t think they were going to be earning an income moving forward…

Is there a 20% chance you might make more than 20K in a year from a possible future wage?

He thought about it for just a few seconds and answered yes. So the plan became to not take Social Security until the full retirement age because 1) they’ve got other funds that are available in retirement that they’re going to use as part of their withdrawal strategy, and 2) if they make more than about 20K, they’re taking Social Security, and are under the full retirement age, then they may have to pay some back to Social Security each year. So that pretty much concluded the discussion.

Our goal at Streamline Financial is to share what’s working and what’s not working from other retirees so that hopefully you can learn from it and you can make your retirement just a little bit better. 

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