Deciding when to start collecting Social Security is one of the most crucial financial decisions you will make as you approach retirement. It’s not just about choosing an age but about understanding how that choice will impact your financial well-being for the rest of your life. This decision can feel overwhelming, especially when you consider that, according to the Social Security Administration, Social Security represents a significant portion of income for those over 65. This decision is important because it will affect the amount you receive for the remainder of your life once the decision is made.
A Story of the Smiths
Stories are a great way to share how things may be affected by the decisions you make, and I wanted to share one about a family that we worked with as we navigated this process. Keep in mind that this simply represents one family’s situation and may not be indicative of yours, so you must do your research or work with a competent advisor to help you navigate your decision on when to begin Social Security.
We will call this couple the Smiths, and they are a husband and wife who were planning to retire at the age of 65. They were faced with the decision of when to begin taking Social Security. Bob, the husband, worked his entire career and had a sizable Social Security benefit that was available to him (subject to income limitations) beginning at age 62, and his full retirement age was 67 (when he could begin collecting Social Security regardless of his income). Jane, his wife, was subject to the same ages under Social Security as Bob, except she had taken off many years from the workforce when the children were young and she was not entitled to nearly the same benefits as Bob. Jane would be better served simply taking 50% of Bob’s benefit rather than claiming her own.
Considering Future Scenarios
When thinking about when to begin collecting, Bob and Jane were not considering what would happen if one of them passed prematurely. If Jane pre-deceased Bob after claiming Social Security, he would continue to receive his benefit amount (plus the inflationary increase each year). However, if Bob were to pre-decease Jane, then she would simply be eligible for his Social Security amount since it was the higher of the two. The important thing to understand is to protect Jane and ensure she receives the highest benefit amount possible, it may make sense for Bob to delay taking Social Security until age 70, obtaining the highest benefit possible along with the largest base that inflation adjustments will be made to for the rest of his and Jane’s life.
Bob and Jane, if they have assets that they could live off of from age 65 (when they retire) until age 70 (when they could collect full Social Security), may put themselves in the unique position to delay benefits until they reach full and maximum Social Security. This would ensure they are receiving the highest amount possible for their lifetimes and Jane is protected by having a higher base and ultimately amount paid to her monthly if something should happen to Bob.
The Importance of Personalized Planning
This story is an oversimplification of the process, and it is a multifaceted decision. In most cases, once your decision is made, there is no turning back. The decision on when to begin collecting Social Security should not be made lightly or simply because other friends or family members did it “this way.” Financial planning is personal, and this is no different. What may have been ideal for others may not be for you and your situation. You should begin planning this early on in your late 50’s or early 60’s to have a plan in place. You can always make adjustments to the plan as time moves on and you get closer to the ultimate date of beginning to claim Social Security.
Let’s Discuss Your Plans
It would be our privilege to discuss your plans for claiming Social Security and what strategy may be best for you and your family. Please feel free to schedule a 30-Minute Zoom Meeting to see how we can assist.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal, and/or tax advice. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult your financial advisor.
