Social Security: Delaying vs. Collecting Retirement Benefits

 The wonderful and frustrating Socratic Method I learned in law school taught me that, for most issues, there were two plausible sides or conclusions.  Much to the chagrin of my colleagues (and dare I say my family at times) this perspective can be downright maddening.  So, as I apologize to those that have to deal with me every day! But in many instances, I also believe that it has served clients well.  As much as we’d all like a simple rule or answer at times, many of life’s decisions, and certainly financial decisions, are best contemplated based on the specific facts and circumstances. 

There may not be a greater example than this financial dilemma:

When do I begin receiving Social Security retirement benefits?

The majority of Americans take Social Security benefits at the earliest date possible, age 62, for the mere fact that they require the funds for everyday living expenses.  For those that have the financial flexibility, implementing the maximum social security strategy comes down to your specific circumstances.

Both Sides of the Social Security Coin

Financial Advisor Magazine recently published two articles on social security.  The first, Many Retirees Wish They Had Waited To Take Social Security and the second, Taking Social Security Early Can Make Sense. Your immediate response might be like mine, well wait a minute, which one is it?  Both articles do a fine job representing the pros and cons as I have shared in the past; and ultimately conclude that the “correct” decision is very individualized.

Delaying vs. Collecting at 66

The benefit of waiting past age 62 is that you will receive more each month.  And, if you wait until age 70 you will receive an 8% Delayed Credit each year from age 66 (technically from your full retirement age for people born between 1943 and 1954).  For those with a long life expectancy, waiting can add substantial dollars; but they are not realized until age 80 in most calculations.

However, delaying comes with a risk too.  If you delay and pass away early (and I say any age is considered too early), this will result in a substantial loss at best and a total loss at worst.  Also, is it reasonable to perhaps take funds from your own investments that ultimately pass to your heirs, while you wait to cross over the breakeven point?   

As shared in an earlier blog post of mine, couples have additional variables to consider due to what essentially amounts to joint life expectancy decisions.  

Whether you are single or a couple, getting the Social Security decision correct can be substantial.  I promise to go easy with the Socratic Method … but considering all of the questions and variables of your individual circumstances may lead to better decisions for you and your family.  Give us a call if we can help!

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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