Should You Claim Social Security Early?

November 26, 2019

Retiring once seemed very far in the future. But now, you’re left to decide what your life looks like after leaving the workforce. A myriad of questions begins to come your way—one of the many being when you should start claiming your Social Security benefits.

Is it unwise to request your benefits early? What factors does it depend on? How do you choose when the “right” time is? With the understanding that the longer a person waits to request Social Security, the higher the monthly amount, it would appear that the best answer would be to wait as long as possible. But, as with all financial matters, one size does not fit all.

Determining the best age for your unique situation can be challenging, because there are certain questions you can’t answer—how your health will be after retirement, for example. While the best age to claim Social Security will be different for everyone, there are a few factors to guide your decision.

We’ll take a look at why a person might delay claiming Social Security, why they might start receiving benefits early, and where to find more information about your individual Social Security benefits.

Here’s the Deal

The age range to claim Social Security is between 62 and 70. Your choices boil down to these three:

You can claim your benefits early, beginning at 62 until your full retirement age, with the understanding that your monthly amount will be reduced.
You can claim your benefits at full retirement age, which depends on the year you were born, and gives you the full benefit amount.
You can delay your benefits after retirement age until age 70, increasing your monthly benefits.

Your benefits last for the remainder of your retirement. Depending on the time you choose to begin receiving your benefits, you’re opting to receive smaller checks for a longer time or larger checks for a shorter time.

Reasons to Delay Social Security

You’ll receive a better return the longer you wait thanks to delayed retirement credits. Each year that you delay Social Security after full retirement age, you receive an 8% increase for each year you waited.

For example, if your full retirement age is 66 and you delay your benefits until 68, you will receive 16% more than you would have at 66. You can continue to delay your benefits until age 70, which would give you significantly more per month than if you had chosen to begin at full retirement age, up to 32%.

It’s clear why many wait as long as possible to increase their monthly benefit amount. For some, however, claiming their Social Security early makes financial sense.

Reasons to Claim Social Security Early

If you choose to take benefits before your full retirement age, you’ll receive less. Your benefits are reduced by 5/9 of one percent for each month before your full retirement age. After 36 months, the reduction increases to 5/12 of one percent.

In spite of decreasing your benefit amount, here are a few reasons one might claim Social Security early:

You aren’t in good health. Healthcare expenses can be detrimental to a retiree’s savings. If your health is failing, you’ll likely need extra funds to cover medical bills and accommodate your needs at home. Taking your Social Security early can provide you with the extra money you need to take care of yourself.
Your investments could provide a better return. Talk to your financial advisor about investment possibilities and how that could affect your Social Security benefits. Some choose to receive benefits early so that they can invest the money, making more than the 8% per year increase they would gain for waiting. Of course, this strategy comes with risks to consider.
You want more cash now. This is a given. Depending on your priorities, you might prefer to have more money now, even knowing that it will mean you’ll receive less monthly. If you would prefer to enjoy your spending in early retirement and you’re confident you’ll have enough, early benefits could be a good option for you.

The Bottom Line

Whether you choose to receive benefits early with a deduction, full retirement with full benefits, or late with additional delayed retirement credits, be confident that the decision will work with your retirement plan and goals.

The Social Security Administration’s Benefits Planner is an excellent resource to determine your full retirement age and how it affects your retirement benefits. You can also easily calculate your benefits on the Social Security Administration’s Benefit Calculator.

Your Local Social Security Expert

Because Social Security is such a moving target, it’s best to consult your financial advisor before you decide to take Social Security early or to delay your benefits. Southwestern Investment Group’s team of advisors will ask the right questions to guide you through the best option for your financial future.