How you invest, and the choices you make in your financial future dictates many things after retirement. But perhaps one of the biggest decisions retirees have to make is how early they should take their Social Security.
For most people, it seems like a simple premise: you work, you pay your withholding, you hit retirement age, you begin to collect Social Security.
But it isn’t that simple.
A big decision awaits those poised to collect: In order to receive the maximum payout, do you begin collecting at age 62, and accept a much smaller payment month-to-month? Or do you wait 8 more years until age 70 at which point your payment will be maximized based on your salary history? Or do you mix it up and start sometimes between 62-70?
It doesn’t help that the two contributing factors for collecting early are important to the decision. Certainly, how long you live plays a large role. Of course no one can put an exact number on that. But the other factor is more based on calculations, that is, how much you will receive each month (SSA.gov has a handy calculator for dertermining this).
Ultimately, in the end, the decision comes down to two umbrella decisions, and their benefits:
#1 Collecting Early is Throwing Money Away
Many experts agree that accepting your benefits early is just like throwing away free money, and argue that delaying until age 70 will reap the greatest reward. An argument that, in large part, plays to the fact that at age 70 you will receive an additional 8% for every year past your “retirement age” (66-67, depending on what year you were born). It is often looked at as a guaranteed return, and many people believe it’s worth the wait.
#2. Take it as Soon as You Can Get It
For a lot of folks, waiting until age 70 to take your SS benefits is just not possible. So there’s nothing wrong with accepting the money if your situation calls for it. Retirement can be expensive, especially if you’re on a fixed income or are paying for healthcare. So unless you are still working, or your portfolio is exploding, accepting the benefits early may be the wisest.
After considering all aspects, and taking it all into account, it’s a wonder that anyone waits at all.
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