By: Sentient Wealth Group
As you approach retirement, one of the most significant decisions you will face is when to begin claiming Social Security benefits. It might seem straightforward, but there are many factors to consider, and your choice can have a lasting impact on your retirement income. At Sentient Wealth Group, we understand how important this decision is for your financial well-being, and we’re here to help guide you through it.
In this blog post, we’ll explore the key factors you should evaluate before deciding when to start Social Security so you can make the most informed decision for your future.
1. Full Retirement Age (FRA) vs. Early or Delayed Retirement
The first thing to understand is your Full Retirement Age (FRA). Your FRA depends on your birth year and is the age at which you can claim your full, unreduced Social Security benefits. For most people, FRA is somewhere between 66 and 67 years old.
- Claiming Early: You can start your benefits as early as age 62, but doing so will permanently reduce your monthly benefit by up to 30%. This may be appealing if you need the income sooner, but it’s important to weigh the long-term impact.
- Delaying Benefits: Alternatively, you can delay claiming benefits until age 70. By doing so, you can increase your benefit by approximately 8% per year after FRA. For many, this is an attractive option to maximize their lifetime Social Security income.
2. Life Expectancy
One of the most crucial factors in deciding when to take Social Security is your life expectancy. If you are in good health and expect to live a long life, delaying benefits could result in more money over time. However, if you have health concerns or a family history of shorter life spans, taking benefits earlier may be the better choice for you.
3. Your Current Financial Situation
If you need immediate income, taking Social Security benefits as early as age 62 might be necessary. On the other hand, if you have other sources of income or savings, delaying Social Security could be a smarter move, allowing your benefits to grow. Be sure to assess your savings, retirement accounts, and other income sources to determine how much flexibility you have in delaying Social Security.
4. Working After Claiming
If you plan to continue working while claiming Social Security, it’s important to understand the earnings test. If you claim benefits before reaching FRA and earn more than a certain amount, your benefits will be temporarily reduced. After FRA, there’s no penalty for working and earning income, which may make delaying benefits a more attractive option.
5. Spousal Benefits
If you’re married, your decision can also impact your spouse’s benefits. The Social Security system offers spousal benefits, allowing a spouse to claim benefits based on the higher-earning partner’s work record. If your spouse is younger or has a lower lifetime earning history, waiting to claim benefits could increase the amount your spouse will receive as well.
6. Tax Implications
Social Security benefits are subject to taxation depending on your overall income. If you start claiming early or delay claiming, it’s important to consider how this will impact your taxes. Working with a tax professional or financial advisor can help you navigate this, as it’s easy to overlook the tax consequences of Social Security.
7. Other Retirement Accounts
When you decide to claim Social Security, you’re likely balancing withdrawals from other retirement accounts, such as a 401(k), 403(b) or IRA. Social Security benefits are a source of guaranteed income, but they may need to be coordinated with other withdrawals to ensure your assets last throughout retirement.
Ready to Make Your Decision?
Choosing when to take Social Security benefits is one of the most important financial decisions you’ll make. It requires careful thought and consideration of your unique situation. At Sentient Wealth Group, we’re committed to helping you make a well-thought-out decision based on your retirement goals.
Get Your Free Guide to Social Security Benefits To further assist you in navigating this critical decision, we are offering a complimentary guide on Social Security. Our guide breaks down some key factors, offers helpful strategies, and gives you insight into how your decision today will impact your retirement tomorrow. Download it now and take the first step toward understanding your financial future.
Download Your Complimentary “When Should You Take Social Security” Guide Today
By understanding the intricacies of Social Security and how it fits into your broader retirement plan, you can gain clarity about your decision. If you have any questions or want to schedule a complimentary consultation, don’t hesitate to contact our team at Sentient Wealth Group. We’re here to support you every step of the way!