When Should I Take Social Security?

Many people want to know when they should apply for Social Security (assuming it still exists when you need it). One of the reasons people ask this question is because the benefit paid is higher if you wait until after your full retirement age, but lower if you apply before your full retirement age. A chart on the Social Security website shows how the timing of when you take benefits impacts the amount paid.

One of the first things to consider is your health and whether you intend to keep working. The reason for this is because Social Security benefits can be taxed and the amount subject to taxation is higher for those drawing prior to full retirement age. It doesn’t make sense to take benefits if you have to turn around and pay them pack as taxes. With that in mind, if you intend to keep working and you don’t need the extra income, delaying the time when you take Social Security can (1) reduce your tax bill and (2) increase the benefit amount when you begin taking benefits.

When to take Social Security is a personal decision. It can depend on depends on several factors, such as your current cash needs, your current health, and family longevity. For those with longevity in their family history, delaying belefits can provide significantly more income over your lifetime. Social Security projects that 1 in 3 individuals who are 65 will live until at least 90 and 1 in 7 will live until at least 95.

For married couples, it can make sense for the lower earning spouse to take benefits early if the higher earning spouse can delay taking benefits until age 70. This is because, at full retirement age, the lower earning spouse can take either 100% of his or her own retirement benefits or 50% of their spouse’s, whichever is higher. See Spousal Benefits calculator. Initially, a spouse drawing on his or her higher earning spouse’s record receives a benefit based on what the higher earning spouse receives at full retirement age, but the amount can increase if the lower earning spouse begins drawing survivor’s benefits. With this in mind, good planning can maximize the benefit rate for a surviving spouse.

Of course, if you need the money to make ends meet, then taking benefits now might be necessary. And if you’re not healthy, delaying benefits might not make sense. Financial advisors usually plug your income needs (or wants) into a nifty calculator and show you how the timing of when you take benefits will impact your monthly income over the long haul. Keep in mind, if you delay taking Social Security, you still need to sign up for Medicare at age 65 to avoid increased premiums for late enrollment.