If you are nearing retirement, deciding when to start taking Social Security is likely on your mind. With options to claim benefits as early as age 62(60 for widows) or delay up to age 70, the timing of your decision can significantly affect your lifetime income.
In this article, we’ll explore the key factors to consider when deciding when to take Social Security. There are several exceptions for widows not covered in this article. Please reach out for more information.
1. Understanding the Basics: How Social Security Timing Affects Benefits
- Early Claiming (Age 62–66/67): You can start as early as age 62, but doing so will reduce your benefit by about 25–30% compared to your full retirement age (FRA). For non-working spouses, you can earn up to a 50% spousal benefit, but this also gets reduced if the non-working spouse claims early.
- Full Retirement Age (Typically 66–67): At FRA, you receive 100% of your earned benefit.
- Delaying Beyond FRA (up to Age 70): For each year you delay past FRA, your benefit grows about 8% annually through delayed retirement credits, up to age 70. Non-working spouses claiming their spousal benefit are not eligible for delayed credits.
The longer you wait, the larger your monthly check but the longer it takes for that decision to payoff.
2. Key Factors to Consider
Your Life Expectancy
If you have a family history of longevity or excellent personal health, delaying benefits can increase your lifetime benefits. If health concerns are present, claiming earlier may make more sense.
Working while collecting benefits
If you collect benefits prior to full retirement age, there is a limit to how much you can make from a job before your benefits are reduced. If you are over this threshold, benefits are reduced based on how much. If you are under full retirement age for the entire year, the SSA will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2025, that limit is $23,400.
In the year you reach full retirement age, the SSA will deduct $1 in benefits for every $3 you earn above a different limit. In 2025, this limit on your earnings is $62,160. The SSA will only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year. Keep in mind this is a temporary reduction until your reach full retirement age, they will recalculate your benefits and credit you back what was withheld.
Your Other Sources of Income
If waiting to collect benefits while needing income, consider the impact larger distributions will have on your nest egg. Waiting will provide additional income down the road, while collecting earlier reduces how much you are taking out of the accounts in the deferral years.
Your Spouse’s Benefits
Married couples need to coordinate their timing. This can impact benefits for the spouse who lives longer as well as impact benefits for those that claim spousal benefits instead of claiming based on their own earnings record.
Consider the impact on Lifestyle
From my experience, those that wait to claim prefer the safety of increased income to help support their needs later in retirement, like healthcare. For clients that choose to claim early, many cite enjoying the money on leisure activities like travel while they have their health, as a motivation.
Tax Considerations
How much of your Social Security benefit is taxable depends on your total income. The SSA bases this on a formula they call combined income. Knowing where you stand and how other decisions factor into the equation can be the difference between your benefit being tax free or as much as 85% of the benefit being counted as income. North Carolina does not currently count social security as taxable income.
At Morrison Wealth Advisors, we help clients across Raleigh and surrounding areas make informed decisions that fit their life, family, and retirement goals.
Reached out if you’d like to discuss when you should take Social Security.
