When To Draw Your Social Security

I am often asked when should I start drawing my social security?  Generally, I tell people to start drawing when they need the money to maintain their lifestyle.  The exception being when they turn 70 years old.  Always start by age 70.

If you wish to begin your social security benefit before your full retirement age which is 66 if you were born between 1946 and 1954.  (You are faced with not being able to earn more than 18,960 per year before you must start giving some of the social security benefits back) If you were born after 1954, for every year after 1954 you add 2 months.  If you were born in 1955, your full retirement age is 66 and 2 months.  This continues until if you were born in 1960 or after, then your full retirement age is 67.

You only have to worry about the new money that you earn for working.  Interest, dividends, and pensions do not count against you, only new earned income.

Rear view of a senior man and woman couple walking arms around each other on a deserted tropical beach with bright clear blue skyWhen you reach your full retirement age, you can earn as much as you want, it no longer matters.  But if you do not need the income to support your lifestyle, you may want to consider delaying your start time.  For each year you postpone starting your benefit payment, your benefit goes up 8% per year or .66% per month.

To determine how much more your benefit will increase between 66 and 70 for example, take your benefit amount at age 66 and increase this by 8% for 4 years.

You can then take the amount you would get now and multiply this by 48 (months).  Take the extra amount you would get at 70 and divide that into the amount you receive for the 4 years between 66 and 70.  This will give you the number of months it will take for you to break even, not counting the time value of money.

For example, let’s say your benefit is 100/month.  $100×48=4800.  So, your monthly benefit at 66 is $100.  Your monthly benefit at 70 would be $136

4800/36=133.32/12=11.1 yrs

If you waited until 70 to start and if you lived longer than 11 years (age 81.1) then it was best to wait until 70 to start.  If you died before age 81.1 then you should have started working at age 66.  Sometimes people ask me how they can increase their benefit.  There is no easy way:

  1. Earn more
  2. Work longer
  3. Delay claiming

One tidbit that is sometimes overlooked is looking at benefits based on ex-spouses.  If your ex-spouse dies and you are at least 60 years old and you were married for at least 10 years, you can collect the same benefit as any widow or widower.

If you have more than one ex that you were married to for at least 10 years, then pick the one that made the most money.

Craig M. McDaniel, CFP

Financial advisor

This commentary is general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purposes.[


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