“What’s the best age to start drawing Social Security benefits?” is one of the most common planning questions I get from clients.
To make the most of your social security income, you need a thorough understanding of the rules, and an integrated strategy that fits your unique circumstances.
So, let’s start with the basics.
Know the rules
The earliest you can draw social security is at age 62 (unless you are a widow, in which case you can draw as early as age 60). For each year you delay drawing, up until age 70, your benefit will increase by about 8%.
Full retirement age (FRA) is generally between age 66 and 67, depending on your birth year, and waiting until you reach FRA means that you will receive 100% of your earned benefits. If you can wait longer than FRA, your benefits increase by roughly 8% each additional year until you reach age 70, when benefits are capped. Age 70 is also the latest you can elect to start drawing.
A married couple can utilize a spousal benefit strategy, which allows one spouse to draw up to 50% of the other spouse’s FRA benefit. This is typically utilized when there is a large difference in how much each spouse has earned during their lifetime. A caveat is that if the higher earning spouse draws early, it will permanently reduce what the other spouse can receive. It should also be noted that a spouse will receive a reduction in their spousal benefit if they draw before their FRA.
Understand your expenses
For some, social security will represent a significant portion of retirement income. Others may have additional sources of income, such as pension plans, investment income, or annuities. But in all scenarios, understanding how much income you need to support your lifestyle in retirement will play a key role in making the appropriate social security decision.
Think about longevity
Social security is one of the few income sources that is guaranteed for life. Social security also typically gets a Cost of Living Adjustment each year determined by the Bureau of Labor Statistics. As people are living longer, having an adjusted lifetime income will become even more important to your planning strategy.
- For those with longer life expectancies, it is typically recommended that you wait until you reach FRA to maximize the benefits you will receive.
- For those with health concerns or a shorter life expectancy, drawing early may be the right choice.
- Planning for the longevity of both spouses is important when using a spousal benefit. When one spouse’s benefit is higher than the other’s, the longer a spouse can wait to draw will impact not only the amount of their own benefit, but the benefit of the surviving spouse as well.
Determining when to begin drawing social security depends on many factors, including how long you can comfortably wait, what your cash flow needs are now, and what your spouse’s needs will be in the future. But when you have a comprehensive understanding of both the social security election framework and what role it will play in your particular financial situation, your decision will be a lot easier to make.
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