Intro
The #1 question we get for social security: When should I take it?
Understanding Social Security and maximizing it is a critical piece of the retirement income puzzle. When you go into the Social Security Administration, be prepared with your strategy for filing. Employees of the administration are not allowed to give you advice, and therefore you need to know what your filing strategy is prior to filing for social security.
You can take Social Security as early as age 62, and the latest you should take social security is age 70. If you haven’t downloaded a statement recently, you can go to www.ssa.gov to create an account, log in and review your statement. On the first page of your statement, you will see your projected benefit for each year from age 62 to 70. Make sure you also check your earnings history for accuracy. Social Security is calculated based on your highest 35 years of earnings.
When to Take Social Security
So when should you take social security? When deciding whether to take social security or not, here are questions to ask:
- What is my life expectancy?
If you can tell us your expiration date, I can tell you exactly when you should take your social security. But aside from that, if you generally have longevity on your side, then waiting can make sense. The longer your life expectancy, the more likely you will get more out of the system by waiting.
So what are the benefits of waiting? For every year you wait to turn on social security, your benefit will increase by approximately 8% a year, and for every year you turn it on earlier, you will decrease your benefit by 6% a year.
When social security was created in 1935, the full retirement age was 65 and the average life expectancy was 61. Taking social security early may have made a lot of sense back then, however, nowadays life expectancy is closer to age 78-80 in the US, and the Full Retirement Age has only increased by a couple of years to age 66-67. If you have longevity on your side, you could potentially draw more out of the system by waiting. - Are you still working?
If you are working, and you are under your full retirement age, you should do a very thorough analysis on how your earnings will impact your social security. The chart below shows the implications. Let’s assume your full retirement age is 66 & 6 months, in 2025, for every $2 of earnings above $23,400, you will reduce your social security income by $1. When you reach your Full Retirement Age, there is a larger amount of income you can earn before your social security is reduced. You can earn up to $62,160 before your benefit is reduced by $1 for every $3 of earnings above $62,160. Once you reach your Full Retirement Age and over, there is no earnings test and penalty against your social security income. For more detailed information, read our blog “How does taking social security while still working impact my social security?“
Example: Full Retirement Age (FRA) = 66 & 6 Months
2025 Retirement Earnings Limit
| Your Age Compared to FRA | 2025 Limit | What Happens Above the Limit |
|---|---|---|
| Under FRA | $23,400/year | $1 of benefits withheld per $2 of earnings above limit |
| Year reach FRA | $62,160/year | $1 of benefits withheld per $3 of earnings above limit |
| Month reach FRA and beyond | No Limit | No Penalty |
Applies to any retirement benefits collected before FRA.
Earnings limit looks at wages only.
Source: https://www.ssa.gov/benefits/retirement/planner/whileworking.html
- Is there a financial need?
During pullbacks in the economy, if you are laid off and having a challenge finding a new position, you may need to turn on social security for the income
- Are you married? How will your filing decision impact your spouse if you are married?
The spousal benefit allows for any spouse to either draw 50% of their spouse’s benefit, or 100% of their own, whichever is higher. You must be married for at least one year to qualify. It’s important to note that 50% spousal benefit cannot be drawn until the higher income earning spouse has turned on their own social security.
Alongside the spousal benefit, there is also a survivor benefit that allows for the surviving spouse to either draw 100% of their own benefit or 100% of their deceased spouse’s benefit, whichever is higher. There is also an important rule to know with a survivor benefit – a widow/widower can turn their survivor benefit on as early as 60, and wait to turn on their own benefit later, allowing it to grow every year they wait. This is extra income that the survivor could be eligible for with no penalty against their own benefit, which continues to grow. The widow/widower could also do the reverse – turn on their own benefit at age 62 and then turn on their survivor benefit (100% of their decease spouses’ benefit) at full retirement age. The decision between which of these two options to take depends on the benefit amount of the survivor’s social security vs the decedent’s social security.
Key to remember: the same rules apply for drawing early. If you draw a spousal benefit prior to your full retirement age, you will reduce your benefit by roughly 6% every year you take early, your 50% spousal benefit you are eligible for at your full retirement age could be reduced to 32.5% if you take at age 62.
- Divorced benefit
If you are divorced, as long as you’ve been married for 10 years, and you are not re-married, you can qualify for a divorced benefit which states that you can either qualify for 100% of your own social security benefit based on your working history, or 50% of your ex-spouse, whichever is higher (not both). The 50% you draw on your ex-spouse will not have an impact on their benefit. Divorced benefits work like regular spouse benefits; one advantage is that you don’t have to wait for your ex-spouse to claim before you can claim your divorce benefit.
Key to remember: the same rules apply for drawing early. If you draw prior to your full retirement age, you will reduce your benefit by roughly 6% every year you take early, your 50% divorced benefit you are eligible for at your full retirement age could be reduced to 32.5% if you take it at age 62.
You are also eligible for a survivor benefit after a divorce (assuming you meet the 10-year requirement). If your ex passes before you, your survivor benefit is 100% of their benefit. You will be eligible for either 100% of their benefit or 100% of your own benefit (based on your own working history), whichever is higher.
Getting the timing right on when you draw Social Security has significant implications on your retirement. Taking the time to understand your optimal strategy is critical as you will not receive advice when you go to file.
We want you to Retire With Purpose!
The Vocare Wealth Advisor Team
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
