When Should I Start Using My Social Security Benefits?

Author: Barbara Rizvi, Director of Financial Planning

As we approach or enter retirement, we are faced with many tough decisions, including when to begin taking Social Security retirement benefits. Several factors that are unique to your personal circumstances must be considered when determining the best approach. It’s important to note, when it comes to Social Security benefits, what is best for a friend or neighbor isn’t necessarily what is best for you. And generalized rules of thumb are just that, generalizations. Only understanding your unique situation can lead to the best solution for you. 

During uncertain economic times like we are experiencing now, it can be tempting to take Social Security retirement benefits before your full retirement age. Doing so can serve as an important lifeline for many and is a viable option. However, doing so without understanding the complexities surrounding Social Security, what other options may available to you or the long-term implications of that decision can result in leaving large sums of money on the table and result in less financial freedom for you and your spouse.

While not an exhaustive list, answers to following questions are important factors that need to be considered before filing for your Social Security retirement benefits.

What is your marital status (single, married, divorced, widowed)?

If you are married, divorced after a marriage that lasted 10 years or more, or widowed, the amount of your spouse’s Social Security benefit may impact your current and future benefits and should be considered in your claiming strategy. In addition, when you begin taking your retirement benefit may have a material impact on the survivor benefits available to your spouse upon your death.

Were you born on or before January 1, 1954?

If born on or before January 1, 1954, you may be eligible for claiming strategies that will increase your total retirement benefit.

Do you have non-spouse family members who are considered financial dependents?

Having financial dependents, such as minor children or adult children with disabilities may allow them to receive additional benefits on your retirement record. In addition, aged parents who are dependent upon you may be eligible for survivor benefits should you pre-decease them.

Do you plan to continue working after beginning Social Security retirement benefits?

The amount of income you earn while claiming Social Security retirement benefits before your Social Security full retirement age is limited. However, once you reach your full retirement age, there are no limitations on the income you can earn and still receive your full Social Security benefit. You can learn more about how much you can earn while receiving benefits here.

How is your overall health?

When evaluating when to take your Social Security benefits, it’s important to evaluate your state of health. Do you anticipate a normal life span living into your mid-80s, a long life span living well into your 90s or is your health compromised in such a manner that your lifespan is likely reduced to your 60s or 70s? If you are single, a shortened life expectancy may suggest taking Social Security retirement benefits early. However, the same strategy for a married person with a shortened life expectancy could result in unnecessary financial hardship for the surviving spouse, which is why it’s important to discuss this decision with your financial advisor beforehand.

Do you have access to other sources of income or investments to help cover your expenses?

The availability and amount of other sources of income such as pensions, annuities, retirement accounts or non-qualified brokerage accounts is a significant factor in determining your best Social Security retirement claiming strategy.

How will taking Social Security retirement benefits now versus delaying impact your taxes or Medicare premiums?

For high income households, when you begin claiming benefits can impact the income adjusted premiums you pay for Medicare. A well-thought out claiming strategy may save you thousands of dollars in Medicare premiums.

How is the stock market performing?

Whether the market is a bull or a bear, the dilemma of whether it is better to take Social Security retirement benefits early or to supplement your current cash needs by withdrawing assets from the market is different for everyone. This decision is best addressed only when also considering all of the previously discussed factors. Your financial advisor can help you decide which strategy is best for you.

What option will allow you to rest easier?

Because everyone’s situation is different, you may have more peace of mind receiving a smaller monthly check now versus delaying your Social Security benefit, even if delaying could generate more income for you over the long term. What is important is that before deciding to take your benefits early, you understand the long-term implications and you are making an informed decision.

As you can see, understanding how all of these factors impact your Social Security options can be mind boggling for almost anyone. If you’re looking for more information about Social Security benefits, the Social Security Agency’s website provides a variety of helpful tools and resources.

However, it’s important to note that neither these resources nor the employees at the Social Security offices can consolidate the information that makes your situation unique and recommend the best options for you. This is why it’s recommended to work with a financial advisor who is familiar with your situation and well versed in Social Security retirement claiming strategies. Not understanding the options available to you and how they will impact your situation can result in a substantial loss of lifetime benefits for you and your spouse or other dependents.

About the Author

Barbara is a Certified Financial Planner (CFP®) and Director of Financial Planning with the Private Client Advisory and Financial Planning teams at First National Bank Wealth Management. She specializes in providing comprehensive and personalized financial planning that incorporates investment, retirement, tax, protection and estate planning strategies.