Are you approaching 60 and considering taking your Social Security benefit early? This sounds like a great idea! Taking your benefits early is one way to increase your income, and you would be eligible to start taking benefits at 62. However, there are a few very good reasons to defer collecting on this benefit if you can afford to do so.

Reduction of Benefits

If you begin collecting on your Social Security benefit starting at age 62, as opposed to waiting until your full retirement age, you will receive a 25 percent reduction in monthly benefits. In addition, the annual cost-of-living adjustment will be correspondingly lower as well. If you are able to afford deferring the date you begin collecting, this could be better for you financially. For every year you delay collecting past your full retirement age, you receive an 8 percent increase in benefits. The decision to defer should be evaluated against other sources of income available in retirement.

You should also consider the long-term effects of receiving reduced benefits. Up to age 78, claiming benefits early would be a net positive. Those who collect at their full retirement age receive a much larger check than those who claim early, thereby widening the gap in terms of total benefits received.

Lower Spousal Benefits

Aside from any benefits you may or may not receive, your decision to start taking Social Security early could have repercussions on your spouse. In the event your spouse outlives you, they would be eligible to receive your income as a survivor benefit – if its higher than their amount. However, if your benefits begin earlier, your spouse’s benefit will be less.

Full-Time Employment Benefits

If you can continue to work in your full-time job, you stand to benefit in two ways. Your employer provides health insurance, an incredibly important and often undervalued benefit, especially for those over 50 years of age. Since Medicare is not available until age 65, retiring early would mean several years of private insurance payments to cover the insurance gap.

Another benefit of maintaining full employment a little longer is the opportunity to save more money to put toward retirement. Each year employed provides more opportunity to save money toward retirement. It also allows your Social Security benefit to grow as well, assuming you defer past your full retirement age.

The decision to take Social Security early is a personal decision, but the total benefit received is a combination of a number of different factors. For some, the decision to withdraw early may be necessary to meet a need. If you can hold out a little longer financially, it might make good financial sense to withdraw later at or after your full retirement age to maximize your Social Security benefit.

If you’d like help figuring out when is best time to take Social Security, feel free to give us a call. We’re here to help.

Tom