Social Security is a critical component of the retirement financial strategy for many Americans, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.
- When to Start?
You have the choice of 1) starting benefits at age 62, 2) claiming them at your full retirement age, or 3) delaying payments until age 70, or 4) any age between 62 and 70.
If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age.
The decision of when to begin taking benefits may hinge on whether you need the income now or can wait, whether you think your lifespan will be shorter or longer than the average American, or the asset mix that you have available to fund your retirement (i.e. breakdown between 401(k), IRA, Roth, and brokerage assets).
- Should I Continue to Work?
Work provides income, personal satisfaction, and may increase your Social Security benefits. However, if you begin taking benefits prior to your full retirement age and continue to work, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($22,320 in 2024). If you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($59,520 in 2024) until the month you reach full retirement age. After you attain your full retirement age, earned income no longer reduces benefit payments.1 - How Can I Maximize My Benefit?
The easiest way to maximize your monthly Social Security benefit is to simply wait until you turn age 70 before receiving payments. However, if you want to retire at age 65, that leaves a 5-year income gap that would need to be filled. This is where you will need to maximize the income generated from your other resources (401(k), brokerage, IRA, etc.).
If you need help deciding when to take Social Security, or how to maximize your benefits or income, please don’t hesitate to contact us today!
1.SSA.gov, 2024