As a CERTIFIED FINANCIAL PLANNER™ professional, I will tell you that deciding whether to take Social Security benefits early is a big decision. It’s important to get professional advice to be sure you make the correct call for you and your family. Since I’m in the financial advice business, it’s not a big surprise that I see plenty of value in some good counsel.
But it may also interest you to know a mathematical background about the decision:
- The cost of taking Social Security early is high. If you wait from age 62 to age 70 your benefit check will be about twice as big each month.
- Your baseline benefit is based on your Social Security full retirement age. (For most readers that’s between 66 and 67 years of age.)
- If you take benefits as early as 62 you will get about 30 percent less than your baseline benefit.
- If you wait to age 70 to start benefits you will get about 30 percent more than your baseline benefit.
- The longer you live, the better it is to wait. If you live to age 82, or so, you will receive more total benefits by starting at age 70 than by starting at age 62.
- The benefit grows over time. Your Social Security income benefit is increased most years using a cost of living adjustment. The average increase since 1975 is 3.7 percent per year. The larger the check starts, the more meaningful those annual increases can become.
Will I regret taking Social Security early?
When you look at recent research surveying retirees about the choices they have already made, you get conflicting results. More than half of all seniors who applied at age 62 for Social Security early retirement benefits later regretted doing so, according to the findings of The 2019 MassMutual Social Security Pulse Check. But according to a new report in the Journal of Aging Studies, few people who claim their Social Security early regret their choice, despite being aware of the financial benefits of waiting.
So, what’s up with the that? Well, it goes back to my opening comments. It’s a big decision. It’s complicated. Every case is different.
- Some people believed their health would not let them live to 82. So they had nothing to lose.
- Some people did not know of any other source of income, so they started their benefits. This is a place where financial planning might reveal more options than you think. For example, a part-time job and some retirement withdrawals might help you get by until you turn 70. The larger benefit check might be enough to cover the earlier distributions.
- Some people understand that it’s a decision that can’t be changed and they are going forward with no regrets. Often seniors look back on many of their life choices and accept them as the “best thing they could think of at the time.”
Where can I get help with Social Security?
If you are not sure of how to decide when you should start Social Security, I repeat my suggestion that you get some advice. Remember, the first meeting with a financial planner should be free. You may find that you get things cleared up right there.
I am a passionate advocate of making choices based on the best information available. I think it’s a good idea to look at your situation in detail and to carefully review your options.
As you visit with financial planners, here are a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-only, CFP® professional can help you make great Social Security benefits choices and help you explore other sources of retirement income. And you might even choose to develop a comprehensive financial plan based on your goals and priorities to addresses all aspects of your financial life. The big-picture approach can help you better prepare to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has wanting to talk, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their financial plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.