We often hear the question, “What is the best age to begin Social Security benefits?”
And while it may sound confusing, our answer is always: “Well, it depends.”
There are a number of factors that impact when you should begin your benefits, and so the answer varies from person to person. Let’s start with the basics. The first important factor is your Full Retirement Age (FRA), sometimes called Normal Retirement Age. Your FRA is the age at which, should you begin benefits, you will receive your full, unreduced benefit amount. While almost everyone is eligible to begin taking benefits as early as age 62, your monthly amount will be permanently reduced if you choose to do that. Those who delay benefits until reaching FRA receive the full amount of benefits they deserve based on the Social Security formula.
The FRA for each person varies by birth year. Take a look at Social Security’s Full Retirement Age Chart for details.
|Year of Birth *||Full Retirement Age|
|1937 or earlier||65|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|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 were born on January 1st of any year you should refer to the previous year. (If you were born on the 1st of the month, Social Security will figure your benefit (and your full retirement age) as if your birthday was in the previous month.)|
Does it Pay to Wait to Maximize Your Benefit?
Many times the advice given in the financial press is to simply delay benefits as long as possible–certainly at least until FRA, and possibly beyond. The reasoning is simple: delaying the start date to your benefits ensures you get a larger monthly benefit, which eventually pays off over your lifetime assuming you live long enough.
In addition, if you start receiving benefits before reaching FRA, you may lose an additional amount if you continue working and earn income above specified thresholds.
For these reasons, the advice to wait until at least FRA seems clearly the best strategy, right? Well, maybe not…
Look at the Whole Picture
We believe it’s important to look holistically at ALL your options. When determining the best time for you to begin benefits, factors other than your FRA and PIA are critical. Here are just a few of them:
- life expectancy
- other income sources
- whether or not you will continue working (even part-time), and how much you will earn
- your marital status and the combined Social Security claiming strategy
- your portfolio withdraw rate
- life expectancy of your spouse
- whether or not your spouse will continue working
All of these are part of the overall picture and must be carefully analyzed to determine how your Social Security benefits will be best managed in your situation.
Sound complicated? It is, but that’s what a knowledgeable, competent, and experienced Personal CFO is for — to help answer your questions and get you more of the Social Security benefits you’ve worked hard to earn. Clients of JPH Advisory Group are welcome to call to review their Social Security claiming strategy any time. In addition, those that don’t have an advisor who can help them make these difficult decisions are welcome to contact us to see if we might be a good fit for them as well.