When to Start Taking Social Security Benefits

The decision of when to take Social Security benefits is one of the most important financial decisions that will affect you in retirement. Social Security pays out on a sliding scale that allows for benefits to be first paid at age 62 and increase until full vesting at age 70. Taking the benefits as soon as they are available (at age 62) will provide money sooner, but leave you with a smaller income stream during retirement. Waiting until 70 to draw on Social Security means a higher total benefit payment, but also passing on several years (between age 62 and 70) of income.

Unfortunately this boils down to a decision of how long you expect to live. Yes that's a morbid thought, and guessing about when you are going to die is something that would make most people squeamish, but there is some logic to it. The average life expectancy of an American is about 78 years (actually 75 for men and 80 for women). It comes down to which reality you would rather face dieing before you "get you monies worth" from Social Security or living longer than you expected and having a lower quality of life due to lack of funds.

If you are in poor health, have high risk factors for disease, or engage in high risk hobbies like grizzly bear wrestling, you're probably better off opting to start drawing on Social Security at 62. If you are in good health and have a positive family history of longevity, you might be better off waiting as long as you can to start drawing on Social Security in order to capitalize on the higher income stream you would receive. It is also important to factor the health of your spouse into the equation as Social Security pays a surviving spouse benefit.

There's no clear cut answer to this question, but it's wise to include these calculations in your retirement planning. Consult your financial advisor, accountant, or tax professional and have them run the numbers. You can also make sure that you have a comprehensive retirement savings plan in effect so that you don't have to rely on Social Security as your main source of income in your "golden years".

It's also worth mentioning that this discussion is based on the assumption that the Social Security system will be solvent when you retire. It's wise to have a comprehensive investment plan to care provide for you in your retirement.