3 Reasons to Take Your Social Security Early
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You've earned your Social Security benefits after a long career. If you're considering taking those benefits early, here are three good reasons why that may be a reasonable option.
Transcript of 3 Reasons to Take Your Social Security Early
- 3 Reasons to Take Your Social Security Early
- You have a choice on when to take Social Security You can start any time from age 62 to 70. Source: Social Security Administration. There are trade-offs: The younger you start, the lower your monthly benefit amount, but youll likely receive benefits for a longer period of time. If you take Social Security before your full retirement age but are still working, your benefit is reduced by as much as $1 for every $2 in income you earn above an annual cap.
- Your life, your benefits, your choice Regardless of when you choose to receive Social Security benefits, on average, recipients receive the same gross payouts over the course of their lifetimes. That doesnt mean your choice is completely neutral based on the age you start receiving benefits. In the next few slides, youll see three good reasons to consider taking your Social Security benefits before your full retirement age.
- No. 1: You really need the money Source: cruisewithmike.wordpress.com If your early benefits would make the difference between starving and surviving, take the money. If you find yourself unexpectedly retiring early without job prospects or enough savings to last until your full retirement age, take the money. Note that if youre disabled and under your full retirement age, you can take Social Security disability instead of retirement benefits, and those disability benefits are not reduced based on your age.
- No. 2: You dont anticipate a long life If you have a good reason to believe you will not survive to reach the average life expectancy, taking benefits early could provide you more over your lifetime than waiting. Of course, none of us really knows when our time is up. If you defy the odds and your expectations, your lifetime benefits could be lower by starting early. Source: U.S. Navy, via Wikimedia Commons.
- No. 3: Youre a decent investor Source: pixabay.com. If youre retired, your key sources of income are your pension (if you get one), your Social Security, and the money you earn from your investments. Money you receive from Social Security is money you dont have to take out of your investments to cover your costs of living. That money youre not taking out of your investments can compound longer on your behalf, potentially remaining tax deferred. Additionally, if you invest well and get a decent rate of return, you may end up with higher lifetime retirement income than had you spent down your investments earlier to cover what Social Security could have been paying you in early benefits.
- Is there a downside? Taking Social Security early may seem like a good idea, but remember If you start early, your benefits are likely permanently reduced. The only do over option requires you to pay back all the benefits youve received since starting and only lets you take that do over in the first year youre receiving benefits. Source: Social Security Administration.
- Dont forget the later years of your retirement As you age, your costs may rise faster than the inflation rate used to adjust Social Security benefit checks. Health care costs have been rising faster than inflation and generally increase as people age, even without considering health care cost inflation. You may need to hire people to help you with tasks you used to be able to handle on your own, adding to your costs. Source: Rama and Eliot Lash, via Wikimedia Commons.
- There still are no guarantees in the market Even if you are a decent investor, the market may not cooperate. Once you start relying on your portfolio for income, a market downturn has a bigger impact because you cant wait it out as easily. Social Security payments have no direct contact with how the market performs. The key risk in Social Security is that benefit cuts could occur if the trust fund runs dry. Source: pixabay.com.
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