Personal Finance

Should A Decrease in Social Security Benefits Stop You From Taking Them Early?

Source: Author.

Age 78 might seem like a long time to wait for the average 62 year old. But the average 62 year old is expected to live another 20 years for males, to age 82, and another 22 years, to age 84, for females. In fact, for people who make it to age 62, 65% of males and 75% of females will make it to age 78. So 65% of males and 75% of females are better off taking Social Security benefits at 66.

Think twice before taking Social Security benefits early.

Dan Caplinger : Social Security makes lower monthly payments to those who take benefits at their earliest opportunity, trying to give people an incentive to wait longer before starting to receive Social Security. Yet the majority of retirees take Social Security before reaching the full retirement age of 66, and only a small fraction delay beyond full retirement age to the maximum benefit age of 70.

It's true that Social Security adjusts benefit amounts to reflect the fact that taking payments later means getting fewer checks over the course of your lifetime, and so it's tempting to think that it doesn't really matter. But the consequences not just on your own retirement benefits but also on spousal and survivor benefits if you're married add a more complicated equation to the decision, and typically, it results in more of a bias toward waiting if you want to get the most lifetime benefits from the program.

This doesn't mean that there aren't sometimes compelling reasons, both personal and financial, to take Social Security early. Yet by starting from the position that you should aim at waiting unless you have to take benefits early, you'll be more likely to make a decision that turns out well for you and your family.

Source: SSA.

Brian Stoffel : I can't disagree with anything either Dan is saying. Most people who live to be 62 will be around long enough for it to make the most financial sense to put off claiming Social Security until at least the retirement age of 66.

But it's important to remember that your ultimate goal should be to enjoy retirement -- not necessarily maximize your Social Security payments. I haven't heard of many people on their deathbed saying, "I wish I would've waited to claim Social Security."

If you've been a diligent saver and investor for your entire working life, you may not need a super-charged Social Security payment to live a comfortable retirement.

The key here is understanding the 4% rule and using it to your advantage. If the payments you'll get from Social Security when combined with a 4% withdrawal from your retirement savings are enough for you to live comfortably, then you should strongly consider retiring as soon as you feel like -- regardless of where your Social Security benefits will be.

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The article Should A Decrease in Social Security Benefits Stop You From Taking Them Early? originally appeared on Fool.com.

Brian Stoffel has no position in any stocks mentioned. Dan Caplinger has no position in any stocks mentioned. Dan Dzombak has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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