For many of our clients who are working near the end of their careers the natural next question that comes to mind is when do I take Social Security benefits? Over the life of your career you have continuously been paying into Social Security. It makes sense you would want to maximize any available benefit that you could receive. This allows you not to have to lean on your outside savings nearly as much.
You may already know you have the choice to file and start taking benefits for Social Security. That age range can start as early as 62 years old and go as late as age 70 years old.
Typically your full retirement age will be about 67 years old. However that doesn’t mean you have to file at your normal retirement age.
Today I want to walk through some of the things you should be considering and thinking through as you are trying to figure out when along the spectrum makes the most sense for you to file for Social Security benefits.
Things to Consider when taking Social Security Benefits:
1. Life Expectancy
Are you from a family that typically lives a very long time? If so you’ll need to make sure you are leaning towards the 70 year mark potentially the very end limit. As you wait each year past 67 years old, you can get an 8% bump up in your benefit. As you claim a longer time period, collecting the increased 8% benefit for a higher number of years makes a lot of sense. What if your family doesn’t typically live a very long time? You may want to consider dropping the age with which you file for benefits. Even though you will get an 8% reduction in your benefit you’ll be claiming for a longer period of time.
2. Spousal Benefit
If you are married one thing you should be considering is how to coordinate your benefit timing with your spouses. There are a couple things that could be going on here. Whether it is looking for the actual spousal benefit which is 50% of your own. Secondarily, you could be trying to time the amount of income you receive. You may expect to have high income years when you are starting to file for Social Security. There is a possibility you start making some of that Social Security taxable which you would not have done otherwise. So when you coordinate the benefit between you and your spouse it’s important to look at your larger financial picture. This allows you to make sure it makes sense in that realm as well.
3. Outside Finances
You might have been planning all along to file for Social Security at your normal retirement age. If that is built into your plan you may not have much of an opportunity to optimize how much Social Security you have. The likelihood of your plan succeeding may be dependent on you claiming Social Security at that age. If you don’t need the income and you have the opportunity to optimize your Social Security benefit we would encourage you to do that. Look at coordinating with your spouse, also leaning into your own life expectancy, and try and time things from that perspective.
Some of the opportunities you might be looking for may already be past. Making sure you have enough income in retirement through Social Security is an important factor. If you are starting to question when the right time to file for Social Security might be, let us know. Please reach out and let us know we would be glad to help!
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