When it comes to planning for retirement, understanding the optimal time to access your Social Security benefits can be a confusing maze. There are many factors at play, but taking Social Security early might be the right decision for you. Here are five reasons why you might want to consider doing so:
You need the money
If you’re no longer working and are aged 62 or above, there could be instances where you desperately need the income. It’s common for retirees to believe that Social Security is the best source of financial inflow.
While this might be the case for some, it’s worth noting that many individuals have alternative resources they could tap into. If you have other investments please consider tapping into these while you let your Social Security benefits grow at roughly 8% per year.
It’s an uncomfortable topic, but if you have health issues and foresee a shortened lifespan, claiming your benefits early might make sense. However, it’s essential to view this decision holistically. If you have a partner or dependent who might rely on your Social Security benefits, their health and potential longevity should also factor into your decision-making.
Remember it’s not just about you. If there’s two of you, it’s about the both of you, especially the surviving spouse.
You both have good Social Security amounts
A lot of couples who have good Social Security amounts consider taking Social Security at the same time, or perhaps similar ages. One strategy to consider is staggering claims. One of you could claim early while the other waits. That way one of your benefits keeps growing to boost up the survivor benefit.
Typically, it’s best for the partner with the lower Social Security benefit to claim first, as this benefit will cease upon the passing of the first partner. The higher benefit gets claimed later, giving a higher amount to the surviving spouse.
There are cases where your spouse might not qualify for a substantial benefit on their own. Or they could be eligible for a more considerable spousal benefit based on your record. In such situations, your early claim could mean an immediate increase in your household’s monthly income.
Remember to always crunch the numbers to ensure this strategy makes financial sense for your specific situation. The trade off is getting more income from the spouse today against getting a higher benefit for the higher earning worker (and especially for the widow) later on.
Concerns About the Future of Social Security
The uncertainty surrounding the longevity of the Social Security Trust Fund has many potential beneficiaries worried. Current projections estimate that by 2033, the Trust Fund could be depleted. However, this doesn’t mean Social Security will become non-existent.
It’s anticipated that about 80% of the promised benefits will still be disbursed. If you’re considering claiming early due to these concerns, ensure you’re basing your decision on realistic projections, such as a 20-25% potential reduction in future benefits, not on the idea that Social Security goes away in 10 years.
Deciding when to claim your Social Security benefits is a highly personal decision, with no one-size-fits-all answer. It’s imperative to understand the implications, do the math, and potentially seek expert advice.
Knowledge is power; the more you know about how Social Security works, the better equipped you’ll be to make an informed decision that maximizes your retirement income.
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