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Should I take social security benefits early, delayed, or exactly at my retirement age?

This depends on your circumstances, other portfolio assets, cash flow needs, and health.

If you are expecting to live a long time (based on family history and individual health) and have other assets to sustain your lifestyle, then maybe you should delay social security in order to receive a higher benefit.

However, if you are relying on it as a main source of income and/or have a dependent/spouse who wants to begin taking the spousal benefit, perhaps taking it earlier makes more sense.

Taking it at the earliest time (age 62) equates to about a 25% reduction in benefit for the remainder of your life. Delaying to age 70 results in about a 30% increase in benefit. On a $2,000/mo benefit at FRA, this could be the difference between $1,500 and $2,600 per month.

What happens if I am working prior to my FRA and claim benefit?

Another thing to note is that if you are going to work in the years before your full retirement age (FRA), your social security benefit is reduced for every dollar you make over a certain threshold. Often times it makes more sense to begin the benefit at FRA or delay it (up to age 70) if you are going to work until to your FRA.

Other ways your social security benefit could be reduced

Your benefit could be reduced due to taxation and/or Medicare premiums. Part of social security benefit could be taxable. Whether none of it, 50%, or 85% of your benefit is taxable depends on household income (if filing jointly) for the given year. In addition, Medicare Part B premium is deducted from your social security benefit.

Benefits for spouse, survivor, and divorced

Note that laws have changed regarding file and suspend. According to current laws:

  • Spouses may not claim spousal benefit until the worker has filed for his/her own benefits.
  • Spouses may receive up to 50% of the workers benefit if they take the benefit at their own FRA or later.
  • If a spouse decides to take the benefit before their own FRA, their benefit would be reduced.
  • Once a spouse passes away, the surviving spouse will switch to whichever benefit is higher. For example, if the spouse who passed away was receiving the higher benefit, then the surviving spouse would begin receiving that higher benefit instead of their own.
  • If you have been married 10 years or more and haven’t remarried, you are entitled to up to 50% of your ex-spouse’s benefit. You may begin receiving this as early as age 60 and you do not need to wait for your ex-spouse to claim his/her own benefits.

We have covered a few of the situations that we hear, but there is so much more information on each of these topics and various circumstances that could occur within these. If you have questions or would like further information, please contact us.