Social Security: Is It Time to Tap Into It?

Here's the good news: You can start taking your Social Security payments as early as age 62. However, it may not be in your best interest to do so, as payments will be less than if you can get by on other income streams. The key to making the right decision is taking into account a variety of factors.

The Social Security Administration uses the term "full retirement age" to describe the age at which a person may first become entitled to full or unreduced retirement benefits. The FRA depends on your age; you can check your FRA year on an SSA chart. The earliest retirees — those born in 1937 or earlier — reached their FRA at 65. However, for the baby boomers, the FRA generally falls between 66 and 67.

But what happens if you don't want to wait for your FRA? Consider "Steve," who was born in 1960. It is now 2019, and he turns 62 in 2022. But if Steve starts taking Social Security then, he gets 30 percent less than if he waits until 67. Or put another way, he gets only $700 for each $1,000 he otherwise would've received. That's a substantial decrease, and if he lives a long life, the total lifetime benefit will be much lower than if he waits.

Here's another twist: You may be able to get even more than your FRA by delaying your retirement age even further. Steve takes another look at the numbers. He's in good health and plans to keep working at his well-paying job even after he turns 67. If he waits until 68, he gets 108 percent of his FRA. At 70, he gets 124 percent of his FRA — nearly a quarter more. (After 70, the percentage doesn't go up any further.) If he lives into his 90s, that's a lot of money.

So what should you do? You have to see what your particular situation is: Are you still happily working? Do you have other savings including individual retirement accounts or 401(k) money you can draw on meanwhile? If you're in poor health, perhaps suffering from a serious condition, you might be better off taking payments earlier. If you've lost your job and think you'll have trouble getting one that pays as well in your 60s, that's another reason for taking earlier payments.

Also, traditional pensions are less common than they were, and unlike Social Security, the income generated by IRAs and 401(k) plans is not guaranteed and is not indexed for inflation.
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So no matter when you were born, you have an eight-year window of choice: minimal benefits at 62 or a "super maximum" at 70. Everyone's situation is different, and there are also special rules for those who simultaneously work and collect Social Security. Give us a call before deciding, and we can take a look at your entire situation to help you make a decision that's right for you.