When should you start taking social security benefits?

A few years back my wife and I took a trip to Paris. And my wife’s a scrapbooker. She likes to take pictures of where we go and make scrapbooks of our trips.

She has a whole section in our scrapbook of me looking at maps. It’s a little embarrassing, I must admit, but we both thought it was funny as she did it without me knowing. :)

But I love maps. They tell me how things work. They help me make decisions. (I think I’m kind of dorky because of it.) But I love to know the the “backgrounds” of things: how things work, why they were built, etc.

And my last few videos on social security (here and here) were on the background of the program. Now we’re going to get into the things that impact your retirement when it comes towards social security.

The big question is: When should you take your social security benefits?

As we work with retirees and those about to enter retirement, social security is one of the hottest topics that we talk about. Let’s dive into the “what you should do,” as there are three (3) big variables.

Age: Variable #1

How old are you? Also, how long do you anticipate living?

Income: Variable #2

Are you still working? Are there other sources of income?

Taxes: Variable #3

And the last variable is taxes.

Variable 3a, let’s call it, has to do with marriage because married couples have a whole other unique sets of circumstances they have to deal with.

We’ll break variables 1 and 2 down in future (soon) videos.

Let’s focus on variable #1: What age should you start taking social security benefits?

The absolute youngest you can take it is age 62. Now if you start at age 62, they’re going to decrease your benefit. If you remember that really dorky, F.R.A. “Full Retirement Age” calculation that we did in the prior video, they take that calculation and then they reduce it to age 62.

So you’ll get a lower dollar amount, but you’ll get it for more years than if you started at 66, 67, or 70. 70 is the latest. If you delay taking social security, you will delay it up until age 70, never any later.

Why is that? Well, it doesn’t benefit you. There’s no reason to delay it or take it any later. So when should you start in that range?

The first thing, and this is the number one variable most people look at is, how long you’re going to live. There is a break even.

The problem with this is I have never met anyone who knows the date they’re going to die. And if they’re married, not only do they have to know that, they have to know the date their spouse is going to die.

By knowing the date you’re going to die, well then we can pick and choose when you should take social security. But no one truly knows that exact date so we have to use some estimates.

How healthy are you? Do you have long life in your family? And we have to pick and choose because there is a break even if you start later.

If you start at age 62 versus age 66, the age 66 dollar amount is a higher dollar amount, but you missed out on 4 years. So you have to live long enough to make up that difference. And this is different for everybody, but for most people it comes to around age 75, 76, somewhere in there.

Now once you get to age 66, 67, you can wait all the way to age 70. But there’s another break even. And for most people that break even comes between age 82 and age 83. So if you are sitting here in your 60s, and you’re really unhealthy, you’ve got something you don’t think you can make it 5 years.

Well for God’s sake, start as early as you can. But if you’re sitting here in your late 60s and you’ve got good health in your family, you’re healthy yourself, maybe you want to delay. Maybe you’ll live past that time to make up the difference.

This is not a hard and fast science on this because nobody knows the date they’re going to die. But that is the first thing you need tounderstand. What are the break evens? Because, by starting early versus starting late, we have to figure out how long you’re going to collect for.

Now if you’re going to live a long, long, long time, you will be very grateful into your late 90s when you waited as long as you possibly can.

But like we said, nobody knows the true difference. In future videos, we will get into those other variables. We’ll get into whether you’re working or not. What other income sources you have. We’ll get into the marriage rules. And then finally, we’ll get into taxation as well.

I hope you got something out of this video. If you have any questions or comments, please leave them.