When Should You Take Social Security? You Can’t Just Rely on the Math.

“When should I start claiming Social Security benefits?” Years ago, the answer to that question was simple. But Social Security rules have changed over the years, making the issue quite complicated. Let’s begin by understanding how the Social Security Administration calculates your retirement benefits.

Benefits are based on your work-life earnings. Here’s how the math works:

Social Security benefits are based on your lifetime wages.1

  • Your highest 35 years of wages are divided by 420 months; this produces your average indexed monthly earnings (AIME).
  • Missing years count as zero.
  • The Social Security Administration then applies a formula to your AIME to determine the amount you’ll receive at full retirement age.

Here’s the good news: There’s no need to do the calculations yourself. Just create an account at ssa.gov/mysocialsecurity,2 and the calculations are done for you. While you’re there, you’ll notice the amount of your monthly check will also depend on when you decide to begin receiving benefits.

The later you wait, the more you’ll get.

The youngest age you can begin receiving Social Security retirement benefits, based on your own work record, is 62.3 But just because you can start receiving Social Security benefits doesn’t necessarily mean you should. That’s because the amount you receive will increase the longer you wait.

If you choose to retire at 62, you’ll get only 75 percent as much as if you waited until your full retirement age (FRA), which ranges from ages 66 to 67, depending on when you were born. In fact, your benefits will continue to grow 6–8 percent for each year you delay retirement up until age 70 when you would receive 132 percent of your FRA amount.

Should you take a smaller check at 62, wait for a larger check at FRA or delay even further to age 70?

The answer: It depends! There is no one-size-fits-all rule of thumb. You should begin by determining how much steady income you’ll need to meet your retirement needs.

    • What do you project your expenses will be?
    • How much will you receive in pensions or other retirement benefits?
    • How much money will your savings generate?
    • Will you continue working part time?
    • Are there any other sources of income you might have?

Taxes are another issue. If you don’t have a pressing need for a Social Security check each month, and that check might bump you into a higher tax bracket, you might want to delay filing for benefits. Your total income also determines Medicare4 and Medicaid5 premiums and eligibility and affects the taxes you’ll pay on investment income — all this can get complicated.

Personal factors can outweigh the math.

Your age, your spouse’s age, work history, life expectancy, survivor needs, taxes, give-backs, spousal benefits, survivor benefits, child benefits and possibly divorced spouse benefits — these are all factors that need to be considered.

In short, deciding on when to file for Social Security can be a very complicated process. There is a lot of information on ssa.gov, but they can’t answer your biggest question — that’s up to you. So, many folks rely on professionals such as accountants and financial advisors to help determine the best time to file. Just make sure that the professionals you hire are experienced, knowledgeable and working in your best interests.

1 https://www.ssa.gov/pubs/EN-05-10070.pdf /
3 https://www.ssa.gov/pubs/EN-05-10024.pdf
4 https://www.ssa.gov/pubs/EN-05-10536.pdf
5 https://www.kff.org/report-section/medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-in-2015-report/