There are many schools of thought on the right age to take back what you’ve put into the system during your working years, but do you know when you want to take Social Security?
The decision of when to take the benefit depends on many things, including your health, financial needs and life expectancy.
People are living longer lives and working later in life, so some people hold off collecting Social Security at 62, the earliest possible age. However, most people are still taking the money as soon as they can.
“When we look at the general population, we are seeing a lot of people take it at 62, early, because oftentimes, people want to retire early,” said Chris Hobart with Hobart Wealth Management. “This gives them cash flow early. Maybe they have poor health and they don’t think they are going to be here long, then it’s beneficial to take it early.”
Americans can start taking Social Security any time after 62 and they must start taking it at 70. The longer someone waits, the more they get. Social Security represents 33% of the total income for older Americans with the average person getting $1,500 a month. And yes, it’s taxable income.
Another thing to consider? Social Security recipients are due for the biggest Cost-Of-Living Adjustment since the early 1980s next year. Hobard said the average person will get somewhere about $80 more each month starting in 2022.
“If you take the money at 62, you took it early so your breakeven point is somewhere between 77 and 83,” Hobart said.
Full retirement age is no longer 65. So what if you want to work and collect? That’s when it gets a little tricky.
Americans who take the benefit who are younger than 66 years and 10 months in 2021, will have $1 deducted by Social Security for every $2 they earn over $18,960. You have to earn less than that to receive the full benefit.
If you’re older than full retirement age, you can get the whole benefit no matter how much you earn working.
Click here to use the Social Security Administration’s financial calculator to figure out your personal situation. This tool will help you determine the difference between taking it at 62 compared to 70. Just remember: Waiting increases the benefit by about 8% a year, or a total of 30% more.
Social Security is not a one-size-fits-all income. It’s best to run your retirement numbers to see which age is best for you.