Do you have conflicting views of when you should claim Social Security? You’re not alone! Claim it sooner or wait for the larger benefit? We’ll help you understand the factors to make the best choice for you to maximize your lifetime benefit.
First, is to understand how different ages can impact your lifetime benefit. Remember when the retirement age was 65? That’s not the case anymore! For those born in 1960 or later, the age to receive your full benefit is now 67. Your lifetime benefit is reduced by 8% for every year before age 67 that you claim Social Security. So, if you claim at age 62, which is the youngest age you can claim, your benefit is reduced by a whopping 40%. Yes, I know what you are thinking - Sure, the benefit is 40% less, but I’m getting that benefit for 5 more years. So, what’s the breakeven? While this calculation may seem straightforward, it’s a bit more complicated because you need to factor in cost of living (COLA) increases over time. In 2023, the COLA was 8.7%. Those COLA increases are even more impactful with a larger benefit. For most single claimant’s, we find the breakeven age is about 80. Die sooner, and yes, you would have received more money than waiting. But what if you live longer than the breakeven age? Not only will you have more lifetime benefit from Social Security, but also more financial security.
But deciding when to claim is more than just an exercise in forecasting when you will die. There are many more factors that need to go into the analysis. These include coordination of spousal benefits and claiming strategy if you are married, tax implications, part-time work in retirement, your retirement savings, and your health status or family history.
When it comes to Social Security, you may have conflicting viewpoints: On one side, you hope to start collecting your benefits as soon as you’re eligible, or maybe you’re concerned you’ll need that income sooner. On the other side, if you wait, your monthly benefit amount will be greater.
To start this analysis, you will need yours (and your spouse’s) Social Security benefit estimate from ssa.gov. As we previously mentioned, there are many factors that will impact your optimum claiming strategy. That’s where we come in. We have the software to crunch the data with your personalized factors to provide you with an objective analysis; and we can guide you through the process. Being fully informed with the facts and the underlying analysis can provide you comfort that you are making the right decision.
Worried if Social Security will even be around if you wait? Watch our other video titled “Social Security” to learn more.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Pharos Financial Advisors is a separate entity from WFAFN.