There's an entire cottage industry that has sprung up for Americans thinking about how long should they wait to start taking Social Security's retirement benefits.
If you only look at size of your monthly benefit, the numbers seem to suggest waiting for as long as possible to start taking the benefit is the right path forward. If you compare the amount of your benefit with what you would get if you waited until you reached what Social Security considers "normal retirement age", which has been set at Age 67 for those born in 1960 or later, your initial monthly benefit will be reduced by 8% per each year early. For example, if you start drawing Social Security as early as possible at Age 62, your benefit will be 40% less than what it would be if you had waited until Age 67 to start.
Similarly, if you hold out longer until Age 70, the longest you can hold out, your initial benefit will be 24% higher than what it would be if you had started taking benefits three years earlier.
But whether waiting like that actually makes sense depends on more than just how old you will be when you start taking Social Security benefits. If you have health problems that might keep you from living longer, for example, taking benefits earlier might make a lot more sense for your situation. If however you have a reasonable expectatation you'll live much longer, waiting to be older before tapping Social Security could be more beneficial for you.
The answer to the question of when to start taking benefits can also depend upon whether you're married or single. If you're married, the right age for you to start pulling Social Security's pension benefits may be different from the optimal age for your spouse to maximize your total household benefit. So what's the right thing to do?
That topic was recently covered on the RetirementNerds podcast, in which host Erik Soderborg ran through a number of examples with financial planner Zacc Call. The following hour-long video provides one of the better overviews we've seen of the factors that can complicate the major life event of deciding when to start taking Social Security retirement benefits:
We came across this video while researching an upcoming article that we're still developing behind the scenes, in which we'll feature another video by the pair discussing a different retirement-related topic.
Labels: ideas, personal finance
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