62, 70 or Somewhere In Between? It's Time to Answer the Question Once and For All: When Should I Claim Social Security?
Deciding when to begin claiming your Social Security benefits will depend on several factors, such as your personal health and financial standings. It's true that waiting to access benefits will increase your monthly payments down the road. But, full access will depend on your birth date and some may need to access benefits sooner. To help you better navigate this issue, below we’re examining the variables that could impact when you decide to begin claiming your Social Security benefits.
Should You Delay Social Security Benefits?
Social Security benefits become accessible at age 62, but full retirement benefits will only be available once an individual reaches their full retirement age, determined by their birth date.1 Any benefits received before reaching your full retirement age are reduced by a percentage, also determined by birth date, ranging between 25 and 30 percent.1
According to the Social Security Administration, this percentage reduction is often permanent, meaning if you were to access benefits at 62, the percentage taken off of Social Security would remain, even after reaching full retirement age.2 If you were to wait longer than the full retirement age to access Social Security benefits, you would receive a retirement credit, a bonus percentage determined by how long you waited, up to a maximum age of 70.2
Social Security and Taxes
It is possible for your Social Security benefits to be taxed. This may happen if the total of half your Social Security benefits plus any additional income is greater than the IRS’s base amount for your tax filing status.3
The current base amounts are:3
- Single or Head of Household: $25,000
- Married Filing Separately: $25,000
- Married Filing Jointly: $32,000
It’s important to note that for couples filing jointly, all taxable income earned by both spouses must be counted - even if one spouse does not yet receive Social Security benefits.
Receiving your Social Security benefits early may be beneficial for those with health conditions or a lower life expectancy. This option provides retirees with a steady source of income earlier, which could also benefit those who are no longer working and lack other income sources in retirement.
Alternatively, if you or your spouse have a family history of longevity and face few health problems, you may find it beneficial to hold off on collecting Social Security benefits until full retirement age.
The benefits of waiting are clear. But for some, withdrawing Social Security benefits early could bring a greater advantage. Investing Social Security funds has the potential to bring a greater return, as long as the benefits of the investment outweigh the loss from accessing Social Security early.
If this is something you are considering, you’ll want to work with your financial planner or investment advisor first to determine if this option is right for you.
Working and Social Security Benefits
You can continue to work past your full retirement age. In fact, working longer can actually increase the total amount you receive in Social Security benefits.2 Remember to consider tax implications with this route, as a greater income may bring greater tax implications.
Your monthly benefits could be reduced if you work and collect benefits before full retirement or if you earn over a threshold. The reduced amount, however, is calculated back into your benefits once you reach full retirement age.4
Considering the factors above, deciding when to receive Social Security benefits will depend on your personal financial circumstances. For the best guidance, work with your financial advisor to examine your options and determine the best course of action.
To discuss in more detail, feel free to reach out to us.
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
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