Should You Take Social Security Early as Part of Your Retirement Income?

Social Security is confusing and many people contact us with questions about it. One of the more popular questions is, is there ever an instance when I should take my Social Security benefit early?

Here are five reasons people typically take their Social Security early and our thoughts about those reasons.

1. I am single and retiring at 63.

   I want to take Social Security early as an additional source of income, so I won’t have to pull money from my portfolio. This way my retirement accounts will last longer.

   This is a solid reason to take your Social Security benefit early—you get the income you need while also leaving portfolios that are possibly earning money for you, alone.

2. I am single and still working.

   I want to take Social Security early so I can pay off my house before I retire.

   The idea here is that by taking the additional income from Social Security now, this woman can pay down her mortgage so that when retired, her home is paid for eliminating  a mortgage payment. Think twice about this one.

   The thought process has potential, but there are some red flags.

   Red Flag #1:  If you’re working and taking Social Security before your full retirement age, you get dinged for that, meaning that the paycheck you thought you were going to get from Social Security might not be as high as you were expecting.

   Red Flag #2:  If you retire before your full retirement age and you’re still working, you can only earn $19,560 a year. [1] It’s not a high threshold you have to pass before they start dinging you.

   Red Flag #3: You are locking yourself into that Social Security rate long term.

3. I’m going to take Social Security as soon as I can because I’m worried that Social Security is running out of money, and I want to get it while I can.

   This scenario is a think twice for me. I don’t like the idea of taking Social Security early just because you think it’s going to run out of money.

   There are a lot of media outlets that push that narrative. They use scare tactics instead of logic and reason. They scare you so that you’ll watch them, and their advertisers will pay them more. If your media outlet is pushing that narrative, you probably should change media outlets.

   There are a myriad of proposals to bolster Social Security, and many of them have passed through the House and Senate with favorable feedback. Some changes to strengthen Social Security’s future are scheduled for the 2023 tax year.[2]

4. I want to take Social Security early because I’m retiring.

   I want to have money now while I’m younger and more active. When I’m in my eighties I’m going to be less active and won’t need as much money.

   The reality is that regardless of when you start Social Security, if you live to your mid-eighties, you will be at break even. The difference is that your monthly income will be smaller if you start earlier. But, at the end of the day, the total amount of what you have received is equal. So earlier is legitimate.

   This strategy can work especially well with married couples. The spouse with the smallest Social Security starts early, infusing extra cash into the budget for travel or splurges. The spouse with the larger Social Security holds off until later allowing the monthly benefit to grow. If one spouse passes away, the surviving spouse receives the larger benefit and loses the smaller.

5. I want to take Social Security early because I don’t think I’m going to live past my eighties. Why should I care if I’m not going to live that long anyway?

   Think twice. Let’s imagine that you’ve had a ton of health problems and no one in your family has lived to age 80. Yeah, you’re probably not going to make it to age 80.  I’ll buy that one. However, most people I’ve talked to underestimate how long they’re going to live. Medical care and medicine advance every year. Doctors are keeping us alive longer and you should plan on living a longer life. Would a larger Social Security benefit be helpful should you need long-term care or in-home assistance? These are  good questions to ask before taking your benefit early based on this argument.

Social Security claiming strategies are unique to each individual. Cookie-cutter advice does not work here. If Social Security strategies have not been woven into your retirement income plan, let’s chat.

[1] https://www.fool.com/investing/2022/09/27/3-social-security-changes-in-2023-to-celebrate-and/

[2] https://www.ssa.gov/OACT/solvency/