Social Security: When It Comes to Benefits, Sooner Is Not Necessarily Better


Key Takeaway: The default setting for many people seems to be age 62 when it comes to taking Social Security. But the default setting isn’t always the right setting. When determining the age you take your benefit, run the numbers before you decide.

In my line of work, I often get people asking about their Social Security benefits. Like many other people, they want to sign up for Social Security as soon as benefits become available, at age 62. And a lot of them are surprised when I tell them, “Not so fast.”

Although everyone’s situation is different, there is wisdom in the notion of taking benefits later. This truth is often ignored in a society where the mantra “The sooner, the better” prevails. It may be easier to default to taking money when it is offered early, but the easiest path is not always the best path.

One of the main reasons I tell people that they should consider delaying their benefit a few years is to allow it to grow. For every year you delay, your benefit amount will increase about 6.5% (from age 62 until your full retirement age—67 for many) to 8% (from your full retirement age until age 70) per year—a rate that the other assets in your portfolio probably can’t compete with!

By delaying your benefit age, you can also help take care of your spouse. That’s because the larger your benefit becomes, the higher the payout to your spouse. Assuming you were the spouse that made the higher income, your spouse will qualify for 50% of your higher benefit, and at your passing, they will receive 100%.

So delaying can help insulate you and your spouse in retirement. Early on, high payouts act like a buffer for portfolios that you might have stretched thin with travel and leisure. And later in retirement, high payouts might protect you against medical costs or long-term care. This latter point is especially important considering that we’re living longer than ever.

Of course, your situation is unique, and it may behoove you to take Social Security as soon as it’s available to you. You might need the income, for example. Or you might be in such poor health that you don’t expect to live past the “break even” age (the point when the reduced benefit that you take early is offset by the higher benefit of postponing until full retirement age should you live a longer life).

The point is that you should consider the whole of your financial situation, now and in the future, before deciding the age at which you take Social Security. It would be great to get a benefit check as soon as it’s possible, but you might be hurting yourself in the long run. Age 62 may be the default setting for many people, but it’s my experience that default settings often need adjusting.

The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.