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Investment Perspective: Social Security at age 66 or 70?

| December 19, 2017
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Social Security at age 66 or 70?

When to claim your Social Security benefits is one of the most complex, and important choices you'll face leading up to retirement. It is an issue we discuss with clients almost on a daily basis.

The Basics.  Social Security benefits can be claimed at any point after you turn 62, and many Americans take their benefits as soon as they can. Claiming benefits early can be smart, but it can pay-off to wait.

If you want to receive 100% of the benefit you're eligible for, you'll need to wait until you reach your “full retirement age” to make your claim. For those people turning 62 in 2017 the full retirement age is 66 years and 2 months. 

Postponing Benefits. You can also delay benefits until age 70, allowing your benefit to grow by 8% for each year you delay.

Spousal Benefits.  A spouse can claim a Social Security benefit based on his/her own earnings record, or can collect a spousal benefit of 50% of the amount of the spouse’s Social Security benefit.  A widowed spouse can receive 100% of the deceased spouse’s benefit.   

When to Begin?  Many people are tempted to wait as long as possible to begin collecting Social Security for one understandable reason: the monthly checks get higher the longer they wait. But remember: There are over 40 months between age 66 and age 70. That's a lot of Social Security checks left uncashed. The expected gain may be an illusion. True, the checks will be bigger, but there will be fewer of them.

Loss of Spousal benefits. It is important to remember that your spouse cannot receive spousal benefits until you do.  Also, the spousal benefit is locked in and will not increase by 8%.  This again is money possibly left on the table.    

The “Golden” vs “Leaden” years The early years of retirement are often referred to as the “golden years, because the retiree is finally free to pursue long-deferred dreams (travel, family, hobbies).  However, the “golden years’ are soon followed by the “leaden years” as energy levels fall and health fails.  For this reason, it might be best to receive Social Security benefits when you can enjoy them.      

Investing the benefitsIf a retiree does not need the money for immediate living expenses, it might be better to take the benefit sooner than later and invest it.  These invested funds could provide a larger benefit than would be available through Social Security by waiting. 

 

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