They say timing is everything. But when it comes to timing Social Security benefits, how much difference does it make?
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Timestamps
0:00 – Timing Social Security
0:43 – Early application
2:31 – Delayed application
3:50 – Assumptions
5:02 – Assumptions: savings
5:33 – Results: Apply at 62
6:48 – Results: Apply at 70
8:32 – Results: Apply at FRA
9:15 – Other factors to consider
10:18 – Will Social Security survive?
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Patrick King is a fee-only financial advisor in Atlanta and the Founder of Prana Wealth. Over his career, Patrick has helped CEOs, all-star athletes, Grammy-winning artists, and many others build their wealth, retire sooner, and create a legacy. Patrick enjoys yoga, mountain biking, golf, travel photography, and Clemson football.
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Social Security Timing: Age 62 vs. 70
When it comes to planning for retirement, one important decision for many individuals is when to start receiving Social Security benefits. The age at which someone chooses to begin receiving these benefits can have a significant impact on their overall retirement income. The two most commonly considered ages are 62 and 70, each with their own advantages and disadvantages.
Starting Social Security benefits at age 62 is the earliest possible option. Many people are enticed by the idea of receiving income at an earlier age, especially if they are facing financial challenges or are eager to retire. However, there are some important factors to consider before jumping at the earliest opportunity.
One of the main drawbacks of starting benefits at age 62 is that the monthly payments are permanently reduced compared to waiting until full retirement age (FRA). FRA is typically between 66 and 67 years old, depending on the year of birth. For each year someone claims benefits prior to FRA, the monthly payment is reduced by a certain percentage. This reduction can amount to a significant decrease in income over the course of retirement.
Another downside to claiming benefits at 62 is the impact it can have on the future surviving spouse’s benefits. When an individual claims Social Security early, it can reduce the potential survivor benefit that their spouse may be entitled to in the event of their death. This reduction may result in a lower income for the surviving spouse during their retirement years.
On the other hand, delaying Social Security benefits until age 70 has its own set of advantages. Firstly, the monthly payments are increased for each year someone delays claiming beyond their FRA. This can result in substantially higher income during retirement. The increase is typically around 8% per year, which can make a significant difference over time.
Another advantage is the positive impact on the surviving spouse’s benefits. When an individual delays claiming Social Security, the potential survivor benefit for their spouse increases as well. This can provide greater financial security for the surviving spouse in later years.
Additionally, waiting until age 70 to begin receiving Social Security benefits can provide a buffer against longevity risk. If someone lives longer than expected, the higher monthly payments they receive can help address any financial challenges they may encounter in older age.
Ultimately, the decision of when to begin receiving Social Security benefits is highly personal and should be based on an individual’s unique circumstances. Factors such as health status, financial needs, and other sources of income should all be taken into consideration.
It is important to weigh the pros and cons of starting benefits at age 62 versus 70 before making a decision. Consulting with a financial advisor can provide valuable guidance in determining the optimal timing for claiming Social Security benefits.
I did a few follow-ups to this video you may want to see, including changes in life expectancy:
Part II: https://youtu.be/f1Bzp44gVcQ
Life expectancy too high? https://youtu.be/fjv3too8yMg
Social Security going bankrupt? https://youtu.be/9J0q01hsXBU
Seems like you didn't subtract the money required to live on for the second couple until they start collecting, the second couple will have spent a big part of investments before collecting!!!!
Retirement account… Yeah, right. How about speaking to real people?
You should be clear: the MONTHLY benefit is lower the earlier you take Social Security benefits. But of course you will be getting those monthly benefits for a longer time period than a person who waits later in life to take Social Security. For people who will die earlier, their total accumulated Social Security benefits will be greater if they take the government money earlier than if they wait until a time when they are closer to their deaths. The other thing that bothers me about this actuarial calculation is that you do not include the VALUE OF LEISURE; if you don't like your job, you will be happier if you retire earlier and take the Social Security benefits earlier. Finally, there is also the "bird in the hand" idea; given how unreliable government is, isn't it better to take the money NOW in case they change their minds and cut your benefits later.
Not making up to a million before retirement is unfulfilled retirement.!! It’s such a blessing that my wife and I aren’t just married, but we’re also each other’s best strategic partner in business. I’m great at what she lacks, she’s great at what I lack and we have a Fin. Adviser to work with. Praise God!! And thank you for this awesome content!!!.!!!
Not if they do not fix social security
I think its not always a scam to wait. Being healthy enough at 62, I continued to work in my state of california job and did not take SS. Because if I did at 62, they would penalize me due to my earnings. I also continued to teach at a community college. I retired at 67, collected two pensions (higher by waiting), and now can work as many hours I do without SS penalizing me …and I collect more SS to add to the two pensions with extra from a part time job. So I think its a scam in some situations but not for me.
All depends on personal situation.
Take the $$$ and run!!
The key to retirement is to be out of debt. This goes for 90% of us. You better have your mortgage, auto payments and credit card debt gone. Those who retire with a mortgage, most are cash strapped.
I retired at the age of 44 from the US military—25.5 years of service. Now, I did work as a govt contractor for about 4 years after retiring. I receive a good retirement from the military and I receive VA disability compensation. So, I’m not sure if it’s better to start drawing Soc Sec at 62 or wait…..with my military retirement and VA disability, I bring in 6 figures gross (disability is not taxed, retirement is both state & federal).
Remember: A bird in the hand is worth two in the bush!
Corporations and 1%ers are not paying their fair share, also stupid, wasteful government spending sucking social security dry. Age demographics too
It’s complicated because it’s a government program? Gimme a break. Social Security is a lot simpler than annuities sold by private insurance companies.
I am drawing at 62. No one can convince me otherwise. You are not guaranteed tomorrow.
Life is short
Definitely retire at 70 why not get more money?
If you really hate working switch to part time or to a
more enjoyable/less stressful job at 62. Then at 70
collect the full payout.
If you can do it, take the money at 62. Make sure your debt is paid down and hopefully you paid off the house.
Do you think that you will outlive the American life expectancy (F 76 ave and M 73 ave).
How much money will you have if you elect Medicare plan A (free at age 65) and Medicare Plan B $155/mo at age 65) and Medicare Plan G ($130/mo at age 65) and Medicare Prescription Plan D $18/mo at age 65? That’s $303 out of your Social Security check each month.
If you select an Advantage Plan, you’re at the mercy of a third party insurance company’s algorithm, which is designed/written to make the insurance company as profitable as possible. Sure, you can file a lawsuit when they deny your coverage, but they’ll delay the court date, until you die.
Now, if you had an averaged $160,000 income for 35 years, your Social Security benefit would be $3,627/mo (at age 70) or $2,572/mo (at age 62). This is unlikely.
The average Social Security benefit at age 70 is $2,575/mo, if you had 35 years of average earnings of $75,000/yr.
Social Security benefits are designed and calculated to be a supplement to your nest egg.