If you’re in your 50s or early 60s, chances are you’ve asked yourself:
“When should I start taking Social Security?”
A lot of people default to age 62 because it’s the earliest option, or 67 because that’s considered the “full retirement age.” But unfortunately, it’s not that simple, and getting it wrong can cost you hundreds of thousands of dollars over time.
Social Security can seem basic, but it’s actually one of the most important retirement decisions you’ll make. Your choice affects not just your income today, but how long your money lasts, and what your spouse might receive after you’re gone.
There’s no right answer to when you should start drawing on Social Security. Like most financial decisions, it depends on your situation.
Here’s what you need to know:
When Can You Start Taking Social Security?
You’re allowed to start collecting Social Security benefits as early as age 62, unless you fall under special circumstances such as disability. But if you take it as early as possible, your monthly benefit will be permanently reduced by up to 30% compared to what you’d get if you waited until your full retirement age (FRA), which is between 66-70 depending on your birth year.
If you wait beyond your FRA, your benefit continues to grow by about 8% per year until age 70. That’s a guaranteed increase for every year you delay, and it adds up over time.
Let’s say your FRA benefit is $3,500/month.
-
At 62, you might get around $2,450/month.
-
At 70, you’d get about $4,340/month.
That’s a big difference, especially if you live a long time.
Why People Take Social Security Early
Even though the monthly amount is smaller, a lot of people claim at 62. Sometimes it’s the right move. For example:
-
You need the income now. If you’re retired or out of work and need money to cover your expenses, taking benefits early can help fill your income gap.
-
You have health concerns. If you expect a shorter life expectancy, taking benefits early may mean receiving more over your lifetime.
These are valid reasons for taking SS at 62, but they come with trade-offs. Remember: the earlier you start, the more you’re locking in a lower income for the rest of your life.
Why It Often Pays to Wait
If your health is good and you can afford to wait, delaying your Social Security can lead to:
-
Higher lifetime benefits. If you live into your 80s or beyond, you’ll almost always come out ahead by delaying.
-
Larger survivor benefits. If you’re married and the higher earner, delaying until FRA boosts the monthly income your spouse will get if you pass away first.
-
Guaranteed growth. The roughly 8% guaranteed annual growth you get by delaying SS is hard to match in an investment portfolio.
Delaying isn’t always easy, but it can dramatically increase your guaranteed income in your later years, when running out of money would matter most.
How Taxes Play a Role in Social Security
A lot of people are surprised to learn that their Social Security benefits are taxable.
Up to 85% of your benefit could be taxed depending on your “provisional income,” which includes:
-
Half your Social Security benefit
-
Withdrawals from pre-tax retirement accounts (traditional IRA, 401k, 403b, etc.)
-
Dividends, interest, and part-time income
This means that you shouldn’t decide on a claiming strategy without coordinating with your retirement income plan.
Smart tax planning here can save you tons of money over time.
Don’t Forget About Spousal Benefits
If you’re married, your decision affects more than just your own benefit. Here’s what you need to know:
-
A spouse who didn’t work enough to qualify on their own (or earned less) can receive up to 50% of your FRA benefit.
-
If you delay your own benefit, you also increase the potential survivor benefit your spouse may receive if you pass away.
Common Questions
“Can I change my mind after I start?”
Yes, but only once. If you change your mind within 12 months of claiming, you can withdraw your application and repay the benefits received. After that, you’re locked in.
“Can I still work while receiving Social Security?”
Yes, but if you’re under full retirement age, your benefits may be temporarily reduced if you earn too much. Once you hit FRA, there’s no reduction based on income.
Final Thoughts
Social Security boils down to a lot more than a monthly check. The age you claim can affect your taxes, your spouse, your long-term financial security, and even how much pressure you put on your investment portfolio.
And while the rules can be complex, the goal is simple: maximize your lifetime income and make the most of your retirement years.
If you’re unsure what age makes sense for your situation, feel free to reach out. I’d be happy to help you think through the options and run the numbers based on your full plan.
– Clint Kraft
Founder and Financial Advisor, Kraft Capital