When Should You Begin Taking Social Security Benefits? – February 3, 2008

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When Should You Begin Taking Social Security Benefits?- February 3, 2008

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC
February 3, 2008

When Should You Begin Taking Social Security Benefits?
February 3, 2008

As a financial advisor who works with a large number of retirees and pre-retirees, I am often asked whether it is advisable to begin taking Social Security benefits as early as possible or wait until your full retirement age or later.  The answer is…it depends.  Lest you accuse me of sounding like yet one more politician during an election year, let me explain.  The age at which you are eligible for full Social Security benefits varies based on your date of birth.  This ‘full’ retirement date means that you are eligible for 100% of the benefits for which you qualify.  You can still take Social Security retirement benefits as early as age 62 but your payments will be for a reduced amount.  You can also postpone receiving your Social Security retirement benefits until as late as age 70 and receive an increased lifetime monthly benefit above your full retirement benefit amount. 


There’s no easy way around this complex issue. Deciding when to begin taking your Social Security retirement benefits will depend on your specific situation.  Let’s look at several different scenarios and see how each might effect your decision.


·        Health considerations.  If you are in poor health, you may want to consider taking early retirement benefits.  While your monthly benefit amount will be smaller, you will receive a greater number of payments.  If your current health is good, consider your family history.  If you have longevity in your family, this would favor waiting and taking the higher benefit at your full retirement age.

·        Job status.  You can begin taking early retirement income benefits even though you are still working.  Unfortunately, you are likely to receive a reduced benefit because there is a retirement earnings test if you have not yet reached your full retirement age.  If you receive early retirement benefits in 2008, you will lose $1 of Social Security benefits for every two dollars of earnings above $13,560. If you are likely to have earnings that exceed this exempt amount prior to your full retirement date, you would likely be better served to postpone receiving benefits until your full retirement date.  Once you reach your full retirement age, your earnings in retirement will no longer reduce your Social Security benefits. 

·        Your marital status.  If you elect to take a reduced early retirement benefit and then predecease your spouse, he or she will be eligible to receive only your reduced benefit.  So if your spouse is significantly younger than you or in excellent health with a family history of longevity, you may want to consider postponing beginning your benefits until your full retirement date.


To begin receiving Social Security benefits, you must notify the Social Security Administration (800 772-1213). The government recommends that you notify the Administration at least three months prior to the date you want to start receiving benefits.


To calculate your ‘break-even’ date for taking reduced early benefits versus waiting for full benefits, go to the Resource Center at www.welchgroup.com and click on ‘Social Security Benefits Calculator’.  As you can see, making the right decision concerning your Social Security benefits is a complicated and important financial matter.  This is one area that you would be well served to seek the advice of your financial or tax advisor.