Should You Take Early Social Security Benefits?

You are eligible to begin receiving Social Security benefits at age 62.

But should you?

According to SSA close to 50% of Americans start drawing Social Security as soon as possible. Yet financial advisors repeatedly warn that this is a bad decision.

They correctly point out that taking Social Security early results in a permanent benefit reduction of between 25 and 30% per month (this number varies because full retirement age is defined as 66 or 67 depending on your year of birth). And delaying until age 70 increases your monthly benefit by an additional 32%.

According to two recent articles in The Motley Fool, the average monthly Social Security check is about $1400. That means drawing benefits at 62 would reduce that amount to around $1100. Wait until age 70 and you get $1848 per month.

So delaying as long as possible is a no-brainer. Right? If you’re one of the fortunate few who has your retirement all buttoned up without depending on Social Security then, yes, by all means delay receiving benefits as long as possible.

But for the millions of Americans with inadequate retirement savings it’s not quite that simple. First, the whole notion of delaying retirement naively assumes your employer is going to be gung ho about your plans. Yet a Retirement Confidence Survey shows that a full 46% of older employees leave the workforce sooner than they expected–55% for health reasons and 24% who get canned.

Let’s put these monthly benefit amounts in the perspective of a happy retirement in the United States. Drawing $1800 per month only means you’re less screwed than if your check is $1100. One way or the other in that income range you’re barely keeping a roof over your head and some food in the fridge.  

But there’s another factor at least as important as parsing all these monthly numbers that the experts never talk about:

What is your time worth?

By definition the older you get the less time you have. And as most people advance in years their health and overall quality of life declines. For those of you at or near retirement age, every year you have left could be your best year. Do you want to postpone your joy and spend that precious time working??

Financial circumstances forced us into early retirement, and what a blessing it has been. Had the Economic Crisis of 2008 not happened we would have without a doubt chosen to “keep on keepin’ on” grinding away in the workplace as we had done our entire adult lives.

Instead we moved abroad to a lower cost of living and have enjoyed the best eight years of our lives. What at the time seemed like a disaster turned out to be a godsend. No financial worries. Stress free. Excellent health. Funded entirely by our monthly Social Security benefits.

Eight years.

What if you could retire early instead of waiting until you’re too old, too tired, and maybe too sick to enjoy the few years you have left? More time to travel–to spend with loved ones–to finally do whatever it is that you want to do?

Our most precious possession is time. And it’s a depleting asset, constantly being spent. The question is:

Who is spending your time–you or someone/something else?

It turns out the issue of drawing Social Security benefits early or late is about much more than money. Decide what is most important to you in life, then devise a plan that supports your decision.

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  1. Truth

    “That means drawing benefits at 62 would reduce that amount to around $1100”

    Wrong. Most would have to wait to about 67 to hit that number on average. I’ve seen the chart.

  2. Carolyn V Hamilton

    “62 would reduce that amount to around $1100. Wait until age 70 and you get $1848 per month.”

    Let’s do some math:

    Meanwhile between 62 and 70 you lose 7 years at $1100 = $7,700.
    The difference between $1100 and $1848 is $748.
    $7,700 divided by $748 = 10.29. So to make up that difference you have to live at least another 10 years, to 80.
    Life expectancy in the US today is 81.2 years for women; for men, it’s 76.4 years.

    And as you point out, how’s your health and energy levels now?

    1. Edd and Cynthia Staton

      That’s right, Carolyn. The system is basically designed as a wash either way if you live to a normal life expectancy. Those who reach the “bonus round” of 80+ are the ones who receive less overall by choosing to take benefits at 62. One way or the other we’re extremely glad we’ve gotten to enjoy all these extra years of retirement by starting Social Security as soon as possible.

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