Home E Insights E 62, 70 or Somewhere In Between? Identifying the Optimal Age for Drawing Social Security

62, 70 or Somewhere In Between? Identifying the Optimal Age for Drawing Social Security

62, 70 or Somewhere In Between? Identifying the Optimal Age for Drawing Social Security

What Is The Best Time To Start Social Security Benefits?

 

Should You Delay Social Security Benefits?

Social Security benefits become accessible at age 62, but full retirement benefits will only be available once an individual reaches their full retirement age, determined by their birth date.1 Any benefits received before reaching your full retirement age are reduced by ~6.5% per year when drawn early.

This percentage reduction is permanent, meaning if you were to access benefits at 62, the percentage taken off of Social Security would remain, even after reaching full retirement age.2 If you were to wait longer than the full retirement age to access Social Security benefits, you would receive an 8% increase in benefit amount per year of delay, up to a maximum age of 70.2

Social Security and Taxes

Typically, between 50% and 85% of Social Security benefits are taxed. This happens based upon your filing status and total sources of income. If the total of half your Social Security benefits plus any additional income is greater than the IRS’s designated number below, 85% of your benefit is taxable.

The current base amounts are:3

  • Single or Head of Household: $25,000
  • Married Filing Jointly: $32,000

It’s important to note that for couples filing jointly, all taxable income earned by both spouses must be counted – even if one spouse does not yet receive Social Security benefits.

Consider Longevity

Receiving your Social Security benefits early may be beneficial for those with health conditions or a lower life expectancy. This option provides retirees with a steady source of income earlier, which could also benefit those who are no longer working and lack other income sources in retirement.

Alternatively, if you or your spouse have a family history of longevity and face few health problems, you may find it beneficial to hold off on collecting Social Security benefits until full retirement age. The breakeven age for drawing as late as possible is generally in your mid-80s, but can vary based upon several factors.

Investment Opportunities

The benefits of waiting are clear. But for some, withdrawing Social Security benefits early could bring a greater advantage. Investing Social Security funds has the potential to bring a greater return, as long as the benefits of the investment outweigh the loss from accessing Social Security early.

If this is something you are considering, you’ll want to work with your financial planner or investment advisor first to determine if this option is right for you.

Working and Social Security Benefits

You can continue to work past your full retirement age. In fact, working longer can actually increase the total amount you receive in Social Security benefits.2 Remember to consider tax implications with this route, as a greater income may alter or have a negative impact on certain tax strategies.

If you collect Social Security benefits before full retirement age, earning additional income over a threshold will reduce your Social Security benefit. For 2022, for every dollar you earn over ~$19k, you can lose 50% of your early Social Security benefit. That’s a big reason to consider waiting! The reduced amount is added back into your benefits once you reach full retirement age.4

Considering the factors above, deciding when to receive Social Security benefits will depend on your personal financial circumstances.

Need Some Help?

If you’d like some help from a CERTIFIED FINANCIAL PLANNER (CFP®) advisor, the Rhame & Gorrell Wealth Management team is here to help.

Our experienced Wealth Managers can help you review your financial and tax situation and come up with a custom tax optimization strategy going forward – all at no cost to you!

Feel free to contact us at (832) 789-1100, [email protected], or click the button below to ask a question or schedule your complimentary strategy session today.

 

Ask A Question

Schedule Now

 

 

https://www.ssa.gov/benefits/retirement/planner/agereduction.html#:~:text=You%20can%20start%20receiving%20your,your%20benefit%20amount%20will%20increase.

 

https://www.ssa.gov/pubs/EN-05-10147.pdfhttps://www.irs.gov/faqs/social-security-incomehttps://www.ssa.gov/benefits/retirement/planner/whileworking.html

 

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Using Options to Reduce XOM Stock Exposure

Using Options to Reduce XOM Stock Exposure

Using Options to Reduce XOM Stock Exposure Strategies For Hedging Concentrated ExxonMobil Stock Positions and Generating Income   If you are a retiree or are approaching retirement as an employee of ExxonMobil, you may have accrued a substantial position in...

Microsoft Stock Incentives and Compensation

Microsoft Stock Incentives and Compensation

Microsoft Stock Incentives and Compensation Learn How to Make The Most of Your Microsoft Stock Incentives and Compensation   Microsoft employees have the ability to acquire company stock in a few different ways: in your Microsoft 401(k), your Microsoft Employee...

Understanding the 83(b) Election and Restricted Stock

Understanding the 83(b) Election and Restricted Stock

Understanding the 83(b) Election and Restricted Stock How The 83(b) Election Can Effect The Taxation of Restricted Company Stock   The 83(b) election must be made within 30 days of receiving restricted stock and can substantially reduce the associated tax...

Market Update – August 2023

Market Update – August 2023

Market Update - August 2023 An Update On The Markets, Economic Changes, and Political Variables   Market Performance It has been a relatively volatile month within a strong year-to-date run for the stock market. The last two weeks have seen a number of economic...