In this post, we’ll discuss when it may make sense to take Social Security early.
The common Social Security planning technique or strategy is to wait as long as you can before you start. If you can wait until age 70, that’s the maximum benefit. And you hear this advice a lot because every year that you do wait, the benefit goes up between 6 and 8 percent.
When we run our Social Security optimizer, we’ve seen that, in most cases, if clients live past between 80 to 83, then it does make sense to delay Social Security until age 70, because that’s about where the breakeven point is. But sometimes we recommend taking it earlier than age 70, and sometimes even earlier, for example, before 66. So, I want to share some of those reasons with you.
Reason #1 to start Social Security early: Your Health
I have a client who recently recovered from cancer. He was 66 and still working, and he decided he just wanted to start taking Social Security now. He had income from work and he didn’t need the Social Security. But he thought he might not live to that breakeven point in his early eighties. Also, we looked at when he would stop working and we estimated that the percent of his retirement income from Social Security would only be about 10 percent, meaning that if he was wrong about how long he was going to live, then it wouldn’t have that big of an impact on his retirement income plan. Due to these factors, we didn’t wait until age 70. This client started taking Social Security at 66.
Reason #2 to start Social Security early: You Need the Income
Every one of us has a unique life and journey to go through. Yours probably looks different than the previous client that I just mentioned. If Social Security is going to make up a bigger percent of your future retirement income, and if you don’t have any other sources of income coming in right now, or they’re just not meeting it, it might make sense to take your Social Security now.
Let’s say that you’re 65 and no longer working. Then you might want to start taking Social Security so that you can have something coming in, if there’s no other wage or income. Waiting to maximize Social Security might not make sense if it’s going to cause you a lot of stress or pain to delay it.
And as a reminder, this is not financial advice for you because I don’t know your specific situation. I encourage you to find a financial professional before you make any decisions about Social Security. Get someone to weigh in before making a decision on your own.
Reason #3 to start Social Security early: You Want to Spend the Money Now
Let’s assume as you’re planning for your retirement. You’ve run the Social Security optimizer and you have a good chance that you’re going to live past 83 and into your nineties because of genetics and healthy living. On the financial side, it probably makes sense to delay social security. But we both know that every single financial decision also has an emotional component to it. Let’s pretend you’re 64 and you’re looking at the next few and you want to travel now, while you can.
So, the third reason to possibly start Social Security early is if you want to spend more money. Now, you might be like one of our clients who wanted to go to Israel a few years back. And she said, when I’m 70, I don’t know how I’m going to feel. I might not be able to walk around as easily as I can now to all these cities that I want to see, and I know that I can do it now. That encouraged her to start Social Security now so that she has the extra income. We also looked at the next 25 years as well, to make sure it wouldn’t cause any red flags within her plan if she were to start Social Security now and everything looked good.
As you can see, when to start Social Security is part science, which is the number part, and then part art, which involves the emotion. It’s going to be different for everybody. And I do highly encourage you to figure out the science part––the numbers part––before you make a decision. Doing so can help give you more confidence to that decision.