Social Security is an integral part of retirement planning. It can provide a reliable source of income to supplement your savings and investments. However, deciding when to start taking Social Security benefits can be complicated. In this article, we’ll discuss some factors you should consider when choosing when to take your Social Security benefits.
Understand How Social Security Benefits Work
Before we dive into the factors you should consider, it’s essential to understand how Social Security benefits work. Your Social Security benefits are based on your lifetime earnings history, and the age you start receiving benefits can impact how much you receive each month.
You can start taking Social Security benefits as early as age 62, but your benefits will be reduced if you begin before your full retirement age (between 66 and 67, depending on your birth year). On the other hand, if you wait until after your full retirement age, your benefits will increase by 8% each year until age 70, when they max out.
Factors to Consider When Deciding When to Take Social Security
Financial Needs
One of the most important factors to consider when taking Social Security benefits is your financial needs. If you need the income to make ends meet, you should start taking benefits immediately. On the other hand, if you have other sources of income and can afford to wait, delaying your benefits could increase your monthly payments in the long run.
Health and Life Expectancy
Your health and life expectancy are also essential when deciding when to take Social Security benefits. If you have a family history of longevity and expect to live long, delaying your benefits may make sense to maximize your lifetime benefits. On the other hand, if you have health issues or a shorter life expectancy, start taking benefits as soon as possible.
Spousal Benefits
If you’re married, you’ll want to consider your spouse’s benefits when deciding when to take Social Security. If your spouse has a higher earning history, it may make sense for you to delay your benefits to maximize your spousal benefits. Additionally, if your spouse has passed away, you may be eligible for survivor benefits that can impact your decision.
Taxes
Social Security benefits are taxable income, and the taxes on your benefits can vary depending on when you start taking them. If you have other sources of taxable income, consider delaying your benefits to reduce the impact on your tax bill.
Employment Status
If you’re still working, consider your employment status when deciding when to take Social Security benefits. If you start taking benefits before your full retirement age and continue working, your benefits will be reduced if you earn over a certain amount. On the other hand, if you wait until after your full retirement age, you can continue working without impacting your benefits.
Making the Decision
Deciding when to take Social Security benefits is a personal decision that depends on your unique circumstances. Consider the factors above, and consult with a financial advisor if you need help deciding. Ultimately, the goal is to maximize your lifetime benefits and ensure that you have a reliable source of income in retirement.
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