Social Security is a supplemental income program funded through a dedicated payroll tax. It’s intended to support citizens through disability, retirement, and survivor benefits. For most people, the first time they have to think about taking Social Security benefits is when they apply for them in retirement.
A question we often hear from retirees is: When should I start taking Social Security?
For someone who has entered retirement, understanding how when you take them impacts your monthly benefit amount can feel complex. In general, there are three times that most retirees consider taking Social Security benefits:
- When benefits become available at age 62.
- When they reach their full retirement age (67 years old if you are born in 1960 or later).
- When they reach age 70.
Taking Social Security at 62
Social Security benefits become available to retirees at age 62. However, because 62 is five years earlier than the current full retirement age, benefits come at a reduced rate for the remainder of your lifetime. In fact, depending on how early you take your benefits prior to your full retirement age, you might expect up to a 30% reduction in total benefits.
Waiting Until Your Full Retirement Age
Full retirement age is determined based on the year you’re born. Let’s take a look:
| Birth Year | Full Retirement Age |
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later. | 67 |
If you wait until your full retirement age to take your Social Security benefit, you can expect your full monthly benefit determined by the number of years you paid into Social Security during your career. To determine your total benefit, you can use the Social Security Administration’s “quick calculator” or you can estimate your benefits by creating a mySocial Security account.
Delaying Social Security
Some retirees choose to delay Social Security until age 70. If you delay taking Social Security past your full retirement age, your monthly benefit could Increase up to 8% per annum. Delaying past age 70 won’t continue to increase your monthly benefit, so this tends to be the last moment where retirees decide to take advantage of Social Security as part of their retirement income strategy.
When Is Best?
Deciding when to take your Social Security benefit is a very personal decision. For many clients of FPC, early Social Security benefits is not a necessary component of their retirement income strategy.
They’ve often saved enough through their own personal portfolio to create a steady cash flow during the early years of their retirement. Alternatively, they may decide to hold off on retiring until later in life, eliminating the need for Social Security benefits at 62 (or even their full retirement age).
In these cases, delaying Social Security benefits may make sense. Increasing your benefit by delaying until after your full retirement age can help you to free up additional cash flow when you may need it for increasing medical expenses, or other costs, as you move through retirement.
Why You Might Take It Earlier
However, there are cases where taking Social Security at your full retirement age, or even age 62, might make sense. If you need your monthly benefit (even at a reduced rate) to create enough cash flow to meet your expenses, then take it!
You might also consider taking your benefit at age 62 or your full retirement age if, for some reason, you anticipate being able to reinvest those funds to generate additional income for yourself and your spouse down the line.
What If You Have a Spouse or Partner With Benefits?
Married couples who both have access to Social Security benefits can choose to create a strategy to maximize their benefits in retirement. For example, if both you and your spouse have equal benefits, you can both choose to delay until age 70 in order to maximize everyone’s monthly payments. Alternatively, if one spouse outearns the other and has a higher benefit, they may choose to delay taking theirs and maximize monthly payments while their spouse (whose benefit might be lower) can choose to take it earlier to increase cash flow.
Creating Your Retirement Income
Social Security is one aspect of your holistic retirement income strategy, but it’s important to have a plan for when you want to take your benefit. Looking at how Social Security fits into your larger retirement cash flow plan can help you determine whether it makes sense to delay your benefit for increased monthly payments, or to take advantage of a monthly benefit sooner. If you have questions about your Social Security benefits, working with your financial planning team can help to clarify your retirement goals, and when your benefit will have the biggest positive impact on your retirement income.