When to start your Social Security benefits

Social Security is an insurance program run by the Social Security Administration (SSA). U.S. workers contribute to the program in the form of payroll taxes. Once certain requirements have been met, they have the opportunity to file to receive benefits. While the SSA provides disability and survivor benefits, this post focuses on the retirement benefits.

Most people take social security at age 62

You can begin receiving social security’s retirement benefits as early as age 62. If instead of taking benefits at 62 you wait until age 70, you will earn about a 7.4% return on your money. There is no increase in benefits if you delay beyond age 70.

Despite the compelling benefit to waiting, many people claim their benefits as early as possible because they under-estimate their life expectancy or they are worried the Social Security program is going bankrupt.

Most people should claim social security benefits at age 70

People are living longer than ever. I calculate the break-even age for clients, which is the age they have to live to in order to be better off delaying social security. The break-even age is typically in the 70s and the average life expectancy for 65 year olds in the U.S. is mid-80s.

When delaying until age 70 is NOT the best option

There are three situations where it does not make sense to delay until age 70.

You are entitled to spousal social security benefits that exceed the benefits based on your earnings history.

If you are married, you can either receive social security based on your earnings (what is listed on your social security statement) or 50% of your spouse’s earnings, whichever is higher. If 50% of your spouse’s earnings will be more, you cannot receive the spousal benefits until your spouse (the higher earner) files for social security.

The higher earner should still wait until age 70 to maximize their benefits, but it may make sense for the lower-earning spouse to take social security based on their earnings history at full retirement age (FRA), and then transition to spousal benefits when the higher earner files at 70. Your FRA is on your social security statement, which can be found at ssa.gov.

If you take social security before your full retirement age, then you will receive less than 50% of your spouse’s earnings when they file. As long as you wait until your FRA, you will receive the full 50%, but never more than 50% if you delay beyond FRA.

You expect to die soon

If you have reason to believe that you will not live beyond the social security break-even age for delaying, then it makes sense to claim your benefits early.

You have no other resources

If you do not have enough in assets to fund your expenses until age 70, you will also need to claim your benefits early.

Social Security is under-funded

Social Security’s expenses are on track to exceed their income this year for the first time in almost 40 years. Reserves are expected to be depleted by 2035. That does not mean that your social security benefits will evaporate. It means that the only money available to pay out will be the income that comes in from payroll tax revenue, or about 75% of the amount originally promised to people like you and me.

While there is cause for concern, social security is a fixable problem with known, viable solutions. Payroll taxes can be increased, benefit ages can be increased, or inflation rates can be reduced. There are many proposals but little political will to shore up the program at this time. If someone wants to exclude social security income from their retirement plan altogether, we can reflect that in their retirement plan and have them save more to be conservative, but I don’t believe that is warranted. Instead, we reduce the social security benefit projections for clients that would be affected by 25%.

Analyze the ideal age to take social security

Deciding when you should claim your social security benefits is a big decision that can mean the difference between tens of thousands of dollars more in your retirement cushion. Analyze the numbers and prepare for potentially delaying social security until age 70. There are exceptions, so let us review your unique situation.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients nationwide and is based in San Diego. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a virtual fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.