When To Take Social Security? Top 10 Questions to Ponder

When to Take Social Security

Ah, the old age question, when to take Social Security.  Honestly, everyone wonders this exact question when discussing their financial planning needs.  Sadly, the answer isn’t one size fits all (or most).  It happens to be a fairly nuanced question, that deserves some careful consideration.  That said, fear no more as today I am going to arm you with the things to consider when making this critical decision in your retirement life. 

Before I begin, let me preface by saying most people reading this will be in their 50s & 60s.  To that end, you will have SS, and it will almost certainly be close to its current form.  There, that should take care of 50% of you that are worried it won’t be here.  Now, let’s dive in and have some fun, shall we?

Are you still working? 

The first question I always ask is if you are still working or not.  My basic rule of thumb is if you are working, and of SS age, but don’t need the funds 100% don’t take them.  There are adverse tax implications many times if you have other incomes, in addition, every year you wait gives you an extra 8% growth.

Need the funds?

The next question to think about is when you need the funds.  Do you have a bunch of funds in cash that can get you through a few years of retirement without SS kicking in?  If you can wait, especially without dipping into your investments, then certainly can be a smart move to do so.

Other fixed incomes? 

What other fixed incomes will I have in retirement?  Do you own annuities or rental properties?  How about the good old fashion pensions?  These are all major factors in seeing how much, and when, of your retirement needs come from fixed incomes vs. variable investment accounts.

How many investments? 

I’d like to say this doesn’t matter, but generally, it does.  If you have a relatively large amount socked away you may have more options as to when to take it.  If you have relatively little, by taking SS late you may use up all your investments which is your only liquid nest egg. 

Where are your investments?

Are all your investments in IRAs or 401(k)s?  If so, something to heavily consider as they will be at a higher tax rate than non-retirement investments.  If you are trying to mitigate taxes or manipulate them to best compliment your needs, where you hold your investments simply matters.

Investment risk? 

Are you a “Nervous Nelly” when it comes to investments?  Or are you a “Wild Willy”?  Again, your basic comfort level with the investment markets, and volatility, will come into play when deciding the appropriate timing for you to take your personal SS.

Health & life expectancy?  

Now there are certainly no guarantees here.  To that end, you have a sense if you are super healthy with no health issues, or if there are some serious longevity health concerns.  Additionally, looking at your family history, albeit isn’t the be-all-end-all, can give you a glimpse into what the future may hold.  If you really want to play the higher power card can take this nifty exam (life expectancy exam).  If you are assuming living longer, waiting can pay off nicely over time.   

The age difference of spouses? 

If you have a spouse their age difference is a huge determinant.  Remember if you drop dead your spouse gets the higher of their benefit or yours.  There are additional complications if your significant other is at a large age difference.  You definitely want to factor this into your decision-making process. 

What will your spouse’s SS be? 

Now not only is your spouse’s age difference relevant but so is how much they earned while working (or if).  This will determine what their personal SS payments will be and is super important in crafting the right SS draw-down strategy for you.

Retirement expenses?

Finally, it is critical to understand your retirement expenses.  What will they look like?  Do you intend to spend more or less in retirement?  Will you front-load your retirement and travel a lot then slow down?  Basically, no Social Security filing question can be answered without knowing what your assumed retirement expenses will be.

When is the right time for you?

The above are my top 10 questions I generally plan through when it comes to my clients and this terrifying question.  There is a lot at stake, and as mentioned earlier, no one size fits all.  This is something I feel pretty strongly should be discussed with your financial planner.  For some, it will be a quick conversation, while for others it is certainly a longer one to think through.  However, in all cases, it has high enough stakes that it warrants a dialogue and careful consideration.

Stay wealthy, healthy, and happy. 

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