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When to Take Social Security

Adam Hoopes, CFP®

Director of Financial Education

Last Updated
January 20, 2022
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Six Factors to Consider

One of the most common questions clients ask me as they near retirement is, “When should I start taking Social Security?” And, while I wish there was a simple answer to this question, as with so many other financial planning topics, my response is most often, “It depends.” As you ponder when to begin taking Social Security, consider the following factors.

1. Your full retirement age

The age at which you become eligible for full retirement benefits is between 65 and 67, depending on when you were born. If you claim benefits before your full retirement age, you will trigger a permanent decrease in your monthly benefit amount, while claiming after full retirement age will lead to an increase in your monthly benefit.

It’s important to know your full retirement age and how your decision to take benefits early or late may be impacted by the other factors listed below.

2. Your monthly income requirements

Begin by estimating your monthly expenses and income requirements in retirement to gain an understanding of how much money you may need to fund your lifestyle. Developing a simple budget can help you identify any monthly income gaps that will need to be filled. If you have gaps, you may need to begin taking Social Security earlier. If you are able to cover your monthly income requirements from other accounts, it might make sense to delay taking Social Security.

3. Your life expectancy

If you are in good health and have a family history of longevity, you may want to delay taking Social Security benefits for as long as possible in case you need extra money in your later years. On the other hand, if you are in poor health, it might make sense to begin taking Social Security earlier, rather than later.

4. Your marital status

The timing of your Social Security benefits may have an impact on the benefits your spouse receives after you die, should you pass away first. Typically, the surviving spouse receives the higher of the two spouses’ benefits. Because of this, it may make sense for the higher-earning spouse to delay taking benefits until after full retirement age in order to minimize the reduction for the surviving spouse.

Also keep in mind that if you are divorced, your ex-spouse may be eligible to claim benefits based on your work record.

5. Your tax liability

If your combined income exceeds a certain threshold, your Social Security benefits may be taxable. Combined income equals your adjusted gross income (AGI), plus non-taxable interest payments, plus half of your Social Security benefit. As your combined income increases, more of your Social Security benefit (up to 85%) is subject to income tax. If you are still working, it might make sense to delay taking Social Security until your earned income is less than the annual limit, or you reach age 70.

6. Your health insurance

When you start receiving your Social Security benefit you are automatically enrolled in Medicare Part A if you are over the age of 65. This can have an impact on your ability to participate in certain health savings plans, even if you continue to have coverage under an employer’s health plan.

Do you have questions about when to begin taking Social Security? Don’t worry, Creative Planning is here for you. We work with clients to plan for a wide range of retirement scenarios, with Social Security benefits playing an important role in the decision-making process. If you would like help evaluating your retirement options, or to discuss any other financial matter, please schedule a call.

For more information about Social Security, contact the Social Security Administration office, or visit www.ssa.gov.

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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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