Taking Social Security - Now or Later?

There are two strains of conventional wisdom regarding the right time to begin taking monthly social security benefits.  The first camp argues that one should begin taking benefits as late as possible, in most cases, to maximize the size of the monthly amount.  If you begin taking benefits at age 62, your monthly benefit level may be reduced by up to 30% vs. what would be received at full retirement age.  And if you delay receipt of benefits after full retirement age, your monthly benefit will be increased by 8% for each year you wait until age 70.  The second camp argues that taking benefits at 62 enables you to enjoy the money during years when you are likelier to be healthy and active.

But there is more to the story for those with savings.  Early receipt of social security benefits may enable you to delay withdrawals from your investment accounts.  And every dollar that continues to be invested, rather than consumed, may enhance your total lifetime consumption and/or the size of your estate.

The question of when to take social security turns on how aggressively you are investing your savings.  If your savings are kept in bank deposits, then we would generally recommend delaying the start of benefits by up to 2 years after full retirement age.  If you have all of your savings invested in the stock market (and you stay invested in the stock market through thick and thin), then it likely makes sense for you to start taking benefits at age 62.  The optimal time to start taking benefits for most investors with balanced portfolios of stocks and bonds will fall somewhere in between these two extremes.

Our calculator can help determine the appropriate start date for you.  What is best for you will depend upon a number of factors.  If you have any questions on the appropriate inputs for your situation, or need to help with interpreting the results, please contact us and we'll be glad to assist you.