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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Social Security Benefits – Take Them Early or Wait?

If you've been a reader of this column for much of any length of time now, you may remember that I have written on several occasions regarding the benefit of NOT drawing Social Security benefits as soon as you can, but rather of waiting until age 70 to start doing so.

To refresh, even though full retirement age for most people now is age 67, it is possible to begin taking Social Security at age 62. However, if you do so, your benefit amount will be reduced from the amount it would be at full retirement age by as much as 30%. 

Further, by waiting to begin drawing your benefit until age 70, you can actually increase your benefit by an additional 32% over the full retirement age amount, equating to a roughly 8% per year return! These are referred to as "delayed retirement credits". There is no further increase after reaching age 70.

These increases, by the way, also increase the spousal benefit that someone's spouse can draw on, if more than their own personal benefit amount.

So you can see there are advantages from delaying the start of Social Security benefits as long as possible, which is why it's something about I feel pretty strongly and remind people often.

That said, there could be situations and circumstances where initiating benefit distributions earlier may be warranted. Here are some that come to mind:

Health Issues - health issues sometimes make going ahead and taking Social Security benefits something to consider. If your health is such that you cannot work anymore (or must reduce how much you work), the consequence may be that you just need the income to live on. Of course, if you have other sources of funds to pay your living expenses, you may want to draw on those first and delay the start of Social Security as long as possible to maximize the benefits.

I've also had clients with health conditions, or just the mentality, that cause them to question whether or not they will live long enough to take any benefits if they delay. Because Social Security benefits stop at death, the thinking is to go ahead and begin taking it so at least to recoup some of what has been paid in to the system. I certainly understand that line of thinking, but then again, if married, you need to consider the effect of such a decision on your spousal benefits as mentioned above, if that is something they will need.   

Qualification for Spousal Benefits – while on the topic of spousal benefits, there are a couple of situations where if you qualify for them, you may want to go ahead and start drawing earlier.

One such situation involves widows or widowers. This is best illustrated by an example from the Social Security Administration's (SSA) website, It reads: Jennie is a 62-year-old widow. She is eligible for retirement benefits based on her work history, and she is also eligible for survivor benefits based on her deceased husband's record. She starts her survivor benefit this year and only applies for widow's benefits. She does not start her own retirement benefit, allowing it to grow. At age 70, she starts her own increased retirement benefit, which she will receive for the rest of her life. 

The above example works to Jennie's benefit because under the law she is entitled to receive the higher of her own benefit or the spousal benefit. 

Another situation is where a person's spouse has already retired and is drawing full benefits. If, as that person's spouse, the spousal benefit (remember, it is 50% of your spouse's amount) you would receive is MORE than 100% of your own personal benefit, then once you reach age 62, by all means apply for spousal benefits. That number is set since your spouse is already drawing benefits, so no reason to wait. Go for it!

Personal debt – having excessive debt that you can't pay may be another reason to consider beginning your Social Security benefits. Of course, ideally, you would be able to pay off your debt before you decide to retire so you don't have the burden going with you into your Golden Years, but sometimes that's just not reality. 

Especially if you have unsecured debt, such as high-interest credit cards, that you can't pay off each month, going ahead now and drawing benefits, even if reduced, may be a savvy financial move. The savings on excessive finance charges which can sometimes exceed even the original charges, may more than make up for the reduction in benefits that you incur. If you have reached full retirement age, you can also continue to work and bring home a paycheck without reducing or eliminating your Social Security benefits, meaning more cash flow and easier ability to get out from under the dark cloud of debt.

Ultimately, whether to beginning drawing Social Security benefits at age 62, full retirement age, or age 70, is up to you and your particular situation. The SSA website cited earlier is a source of good information and even some helpful calculators, and financial advisors can also help you in making the best decision for you. 

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