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Delaying Social Security: Should You Do It?

There is no such thing as universal financial advice. When reading any news story, blog post, or magazine article, one must remember that any advice or discussion about financial topics are general–they may not be best choice in your particular case. Many decisions about investments, use of trusts, and similar matters should only be undertaken after consultation with a professional upon explaining your exact situation.

But that is not to say that it isn’t important to learn about some of the general issues beforehand to better understand common financial planning themes. For example, what are the pros and cons of delaying the receipt of Social Security benefits?

A Q&A story from the Herald provides a helpful summary of the issue. A questioner just turned 62 years old. He was wondering if he should start taking Social Security now ($1,800 a month), wait until he is 66 years old ($2,4000 month), or wait even longer.

The answering financial advisor provides an overview of how the system works. For those born before 1954, the retirement age is 66. Collecting Social Security early, at 62, results in payment of 75% of the monthly benefit. On top of that, if you are still working at that point, you will take a 50% cut of any amount over $15,120 annually.

Conversely, delaying until 70 actually results in a large bump–around 32% higher than the “regular” payment amount at 66 years old. In fact, this figure may be even higher, because annual cost of living increases may be applied to deferred payments. For the man in the above scenario, his monthly amount would be around $3,200–or even higher.

So which option is best?

There is no easy answer. One on hand, waiting until 70 obviously results in the highest monthly payments. Those payments are guaranteed for life, which is a huge perk. Considering the benefit of delay, it may be prudent to do everything possible to survive financially without taking Social Security early by using all other resources first (savings accounts, IRAs, etc.).

However, not everyone has those alternative sources of income to survive until 70. At that point the assessment is a balance between working longer (if that is an option) or deciding to bite the bullet and take the earlier Social Security payments.

Many other factors come into play in these decisions, as well. At the very least, it is critical to evaluate all of your options and closely consider your long-term needs and goals before making any permanent financial decisions.

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