Figuring out when to take your Social Security benefits can be confusing and it is a question that comes up very frequently. Sometimes it leads to other questions such as:
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- What is the break-even point for Social Security and how does it affect me?
- What is the best age to retire for Social Security?
- Is it better to take Social Security at 62, 66, or wait?
- How Can I avoid missing out on lost Social Security Benefits?
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Let us take a look at some of these retirement questions, but first, if you are getting close to making this decision you should check out my FREE retirement video. How To Avoid Going Broke In Retirement.
What is the break-even point for Social Security and how does it affect me?
The system was designed with this thinking in mind. It should not really matter when you take your benefit as long as you live to a fairly average life expectancy. Why?
If you take Social Security at age 62 you get a smaller check for more years.- If you take Social Security later, you get a bigger check but for fewer years.
- The total amount you receive should be about the same by the time you reach 78 to 80.
- The age at which the money equals out is called the break-even point.
This is an important concept because it can help you decide when the right time to take your Social Security benefits is for you personally.
Let us look at an example:
- Let us say you are age 62.
- You are in very poor health.
- You have a very short Life expectancy.
- You are not married.
In this case, you might be better off taking your benefit early knowing that there is a pretty good chance you will not live beyond your break-even point.
Also, because you are not married there is no reason to wait and try and boost your survivors’ benefit for the spouse you may leave behind.
One more example:
- Your Age 62.
- You are in great health.
- You have a history of longevity in your family
- You have sufficient retirement savings and do not really need Social Security to retire.
- You plan to work for significant income as a consultant when you retire.
In this case, waiting to turn on Social Security might be the better bet as you will likely end up living beyond the break-even point. This means you will do better than break even.
What is the best age to retire for Social Security?
Unfortunately, there is no one size fits all answer to this question. As you can see from the above examples much of what’s best will be determined by your circumstances.
That being said how can you find out what is best for you personally? You could:
- Check out the many free resources at SSA.gov the official website for Social Security.
- Google free Social Security calculators
- Work with an advisor that offers FREE Social Security analysis
The official government website for Social Security offers many free tools and articles that could help you to determine what will be best for you.
There are also other free tools online you could google that will allow you to run some comparisons such as the one found at https://opensocialsecurity.com/. Mike Piper is a CPA in St. Louis and has created this tool in addition to writing 9 books on Financial Planning.
When it comes to Social Security planning, I have found that having the right tools and knowing how to use them are two different things.
We use one of the premier Social Security tools called Social Security analyzer for our clients. And while the tool itself is quite sophisticated knowing how to get the most money out of the system is really only half the battle.
We take the information we get from the Social Security tool and plug it into a “big picture” tool that helps us determine if optimizing Social Security benefits actually makes sense for our client.
We have found through experience that getting the most out of the Government is not always in the best interest of our clients.
For example, sometimes the Social Security software recommends waiting until age 70. Waiting to age 70 however, might require our client to put too big a strain on their other investments while they are delaying turning on benefits putting them at greater risk of running out of money.
Like I said analyzing the best age to take Social Security can get complicated and the right answer is not always obvious. To make matters worse this is an irrevocable decision, for the most part, so you need to get it right the first time.
If you need help making this decision working with an advisory firm like ours might be a good option as we include this analysis for no additional cost with our service. Here is a link to what it costs to work with us in case you were wondering. Cost to work with us.
Please keep in mind knowing when to take Social Security is only one of the big decisions you will need to make when getting close to retirement. To learn how to avoid other important retirement mistakes please check out our FREE video. How To Avoid Going Broke In Retirement While Holding On To Your Nest Egg.
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