Many people consider Social Security income benefit as one of the singularly most reliable source of guaranteed income for retirees. Depending on the time you begin withdrawing benefits, the amount can vary and for this reason, many speculate and are unsure when it would be the best time to begin receiving social security benefits. Let’s take a look and see when it would make the most sense for a retiree to start taking the Social Security income benefit depending on their financial situation.
Fast Fact: The retirement age is gradually being delayed as people are living longer.
Social Security benefits can begin as early as 62 years old and the longer you delay in receiving the benefit, the benefit amount increases. However, the latest one can start receiving the benefit is at age 70. Based on the Social Security Administration, if you were born before 1937, the full retirement age is 65 and if you were born between 1943-1954, then your full retirement age is 66. If you were born after 1960 then your full retirement age is 67. As described above, you can see that the retirement age is getting delayed as more people tend to live longer nowadays.
Before retiring, one of the decisions to consider is if one should start taking the retirement benefit now or to wait until later.
For example, let’s say that a 63.5-year-old retiree had an option to either begin receiving a monthly sum of $1,000 or wait 2.5 years until age 66.5 to receive $1,250 per month as Social Security income. The question then becomes, would it be beneficial to wait 3 years to receive an additional $250 later? The answer is, it depends.
Based on a calculation, the retiree will be forgoing a total of $36,000 from 63.5 to age 66.5. In the case that the retiree begins receiving Social Security benefit at age 66.5, they will break even and realize the difference of $250 a month at age 78.5. In that case, if this individual only lives until age 90, then they will have received just about $36,000 for not receiving Social Security income at age 63.5.
In summation, if one does not have any retirement income and does not believe to live past age 90 then there is no added benefit in delaying receiving Social Security income. As discussed, it is important to determine when would be best to start receiving Social Security income benefit unique to one’s financial situation.
Disclosure: Profectus Financial does not provide legal or tax advise. Please consultyour own legal or tax advisor for qualification of any investment or tax strategies. This is for educational purposes only. This is not a soliciation of a particular investment product or company.