When Should You Take Social Security?

If you delay benefits past your full retirement age until you reach age 70, you'll receive 132% of your monthly benefit amount. The trade-off then is receiving fewer checks but larger ones.

And your full retirement age? It's the age when you can claim the full benefits you've accrued throughout your working years. Your full retirement age is based on when you were born. For the first several decades of the program, the full retirement age was 65. But amendments introduced in 1983 allow the retirement age to increase over time to keep Social Security solvent.

Doing the math
Figuring out the right time to take benefits isn't always straightforward. Your annual Social Security statement will list your projected benefits between age 62 and 70, assuming you continue to work and earn about the same amount through those ages. A Social Security break-even calculator can also give you some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.

Say you have the option of receiving a $1,200 a month benefit at age 62, $1,700 at full retirement age at 66 or $2,200 a month by delaying benefits until age 70. If you wait until age 70, it will take you until age 79 to break even with the benefit amount you would have received if you started taking them at age 62. If you were to start at age 66, it would take you until age 75 to do that.

A break-even calculator can tell you the best age to start taking benefits by showing how much money you'd receive over time. Of course, you still need to account for what would affect your ability to draw benefits or how far those benefits might go. Here are a few things to consider:

• How will the future cost of living adjustments affect your benefits?
• What's your life expectancy and health status?
• How much tax will you owe on the benefits?
• If you plan to continue working while receiving benefits and earn income above certain thresholds, your benefits could be reduced and you might owe income tax on them.
• Can you draw on retirement income like a pension or 401(k) plan, IRA or annuity?
• What about your cash needs? You may want to work part time until you reach full retirement age or even longer to maximize your benefits. If you think you'll beat the average life expectancy, then waiting for a larger monthly check can be a good deal.
• If you're the higher-earning spouse, you may want to be sure your surviving spouse receives the highest benefit possible.

There's no correct claiming age for everyone, but the rule of thumb is if you can afford to wait, delaying Social Security can pay off over a long retirement. But it's not always possible to wait, especially if you're in poor health or can't afford to delay. There's no perfect formula for when to take Social Security, but considering timing scenarios can help. Work closely with an estate-planning professional to decide the best time for you.

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