When Should You Take Social Security?
The Decision That Could Cost You Thousands (Or Save You Thousands)
You turn 62 and suddenly you can claim Social Security. The money's right there, waiting for you. Why wouldn't you take it?
Well, here's why: claiming at 62 instead of waiting could cost you tens of thousands of dollars over your lifetime. Maybe even hundreds of thousands, depending on how long you live.
But here's the thing. Sometimes claiming early actually is the right move. Sometimes waiting until 70 makes sense. Sometimes somewhere in between is best.
The problem? Most people make this decision based on what their neighbor did or what they heard at a barbecue. That's not a strategy. That's a guess. And this is too important to guess about.
How Social Security Benefits Actually Work
Let's start with the basics, because Social Security is confusing enough without all the jargon.
Your Social Security benefit is based on your highest 35 years of earnings. The Social Security Administration calculates something called your Full Retirement Age, or FRA. This is the age at which you can claim your full benefit amount with no reductions or increases.
Your FRA depends on when you were born:
- Born in 1960 or later? Your FRA is 67.
- Born between 1955 and 1959? Your FRA is somewhere between 66 and 67.
- Born in 1954 or earlier? Your FRA is 66.
Now, here's where it gets interesting. You don't have to wait until your FRA to claim. You can start as early as 62. Or you can wait as late as 70. When you claim makes a huge difference in how much you get each month.
The Trade-Off: More Money Now vs. More Money Later
If you claim Social Security before your FRA, your benefit gets permanently reduced. If you wait past your FRA, your benefit increases. It's that simple.
Let's use some real numbers. Say your full benefit at age 67 would be $2,000 a month.
If you claim at 62: Your benefit drops to about $1,400 a month. That's a 30% reduction, and it's permanent. You'll get that reduced amount for the rest of your life.
If you wait until 70: Your benefit increases to about $2,480 a month. That's 24% more than your full benefit, and it's also permanent.
So claiming at 62 gets you $1,400 a month. Waiting until 70 gets you $2,480 a month. That's a $1,080 difference every single month. Over a year, that's nearly $13,000.
Now, I know what you're thinking. "But if I claim at 62, I get eight extra years of payments before the 70-year-old even starts collecting!" True. But here's where the math gets interesting.
The Break-Even Point (And Why It Matters)
There's a point where waiting to claim catches up to claiming early. It's called the break-even age.
If you claim at 62 versus waiting until 70, the break-even age is typically somewhere around 78 to 80. That means if you live past 80, you'll end up with more total money by waiting. If you don't make it to 80, claiming early would have given you more.
Now here's the gamble: most people don't know how long they're going to live. If you've got health issues and you're pretty sure you won't make it to 80, claiming early might make sense. But if you're healthy and longevity runs in your family? Waiting could pay off big time.
And here's something people forget: Social Security includes annual cost-of-living adjustments. A higher starting benefit means those increases are applied to a bigger number. Over 20 or 30 years of retirement, that compounds significantly.
So yeah, the break-even age matters. But it's not the only thing that matters.
When Claiming Early Actually Makes Sense
I've spent a lot of time explaining why waiting can be smart. But let's be real. There are situations where claiming at 62 (or shortly after) is absolutely the right call.
You Need the Money
If you're out of work, you don't have other income sources, and you need Social Security to pay your bills, then claim it. A reduced benefit that keeps the lights on is better than no benefit while you drain your savings or go into debt.
This isn't about optimizing every dollar. It's about survival. And that's perfectly okay.
You Have Serious Health Issues
If you've been diagnosed with a serious illness or you have strong reasons to believe you won't live into your 80s, claiming early makes sense. There's no point in delaying benefits you may not live long enough to enjoy.
Some people feel guilty about this. Don't. Social Security is your money. You paid into it your entire working life. If you need it now, take it now.
You Want to Delay Drawing from Investments
Sometimes claiming Social Security early allows you to leave your retirement accounts alone a bit longer. If the market's down and you don't want to sell investments at a loss, using Social Security to cover expenses can be a smart move.
This is a more nuanced strategy, but it can work well in certain situations, especially if you're planning to convert traditional IRA money to a Roth or you're managing your tax bracket carefully.
When Waiting Makes the Most Sense
On the flip side, there are situations where delaying Social Security is clearly the better choice.
You're Still Working
If you claim Social Security before your FRA and you're still earning a paycheck, your benefits might be reduced or withheld. For 2024, if you earn more than $22,320 a year, Social Security withholds $1 for every $2 you earn above that limit.
So if you're 63, still working, and earning $50,000 a year, taking Social Security is probably pointless. You'd get a reduced benefit and then have part of it withheld because of your earnings. Just wait.
You're in Good Health and Longevity Runs in Your Family
If your parents lived into their 90s, you're healthy, and you've got every reason to believe you'll be around for a while, waiting to claim Social Security starts to look pretty attractive.
That extra $1,000+ per month adds up fast when you're collecting it for 20 or 25 years.
You Have Other Income Sources to Bridge the Gap
If you've got retirement savings, a pension, rental income, or other resources to live on while you delay Social Security, that's ideal. You can let your benefit grow while living off other assets.
This is especially smart if your other income sources are taxable and you're in a higher tax bracket. Delaying Social Security gives you a bigger guaranteed, inflation-adjusted income stream later when you might need it more.
What About Spousal Benefits?
If you're married, the Social Security claiming decision gets even more complicated. And by complicated, I mean you've got more options to consider.
A spouse can claim benefits based on their own work record or up to 50% of their partner's benefit, whichever is higher. But here's the catch: to claim a spousal benefit, your partner has to have already filed for their own benefits.
There are also survivor benefits to think about. When one spouse dies, the surviving spouse gets to keep the higher of the two benefits. So if one spouse waited until 70 to claim and built up a big benefit, that larger benefit protects the surviving spouse.
This is where coordinating your claiming strategy as a couple can really pay off. Maybe one spouse claims early while the other waits. Maybe both wait. It depends on your ages, your health, your income needs, and your savings.
If you're married, don't make this decision in isolation. Look at the big picture for both of you.
Taxes: The Thing Nobody Talks About
Here's a fun surprise: your Social Security benefits might be taxable.
Whether your benefits are taxed depends on your combined income, which includes your adjusted gross income, any tax-exempt interest, and half of your Social Security benefits.
If your combined income is between $25,000 and $34,000 (single) or $32,000 and $44,000 (married filing jointly), up to 50% of your benefits may be taxable. Above those thresholds, up to 85% of your benefits could be taxable.
What does this mean for your claiming strategy? Well, if delaying Social Security allows you to do Roth conversions or manage your tax bracket more effectively in your 60s, that might be worth considering.
Taxes and Social Security interact in ways most people don't think about until it's too late. This is another reason to run the numbers before you decide when to claim.
Don't Just Follow the Crowd
I see this all the time. Someone turns 62, their buddy claimed at 62, so they claim at 62 too. Or someone hears that waiting until 70 is the smart move, so they wait without considering their own situation.
Here's the truth: there is no universal right answer. Your neighbor's situation isn't your situation. Their health isn't your health. Their savings aren't your savings.
The best claiming age for you depends on factors like:
- Your health and family longevity
- Whether you're still working
- Your other income sources and retirement savings
- Your marital status and spousal benefits
- Your tax situation
- Your overall retirement income plan
This isn't a decision you should make based on a hunch or what feels right. It's a decision that deserves actual analysis.
How We Help With Social Security Planning
At Iron Eagle Advisors, we help folks in Charlottesville figure out the best Social Security claiming strategy for their situation. Not for some theoretical average person. For you specifically.
We look at your complete financial picture: your savings, your income needs, your health, your tax situation, everything. Then we run different scenarios to see how claiming at different ages affects your retirement income over time.
Sometimes the answer is obvious. Sometimes it's close, and we help you weigh the pros and cons. Either way, you make an informed decision instead of guessing.
And look, once you claim Social Security, that decision is mostly permanent. You can't just change your mind next year. So it's worth taking the time to get it right.
We're not talking about a few hundred bucks here. We're talking about a decision that could be worth tens of thousands of dollars over your retirement. That's worth a conversation.
Want to Work Towards Maximizing Your Social Security Benefits?
Let's analyze your situation and create a Social Security claiming strategy that works for you. Schedule a free consultation with Iron Eagle Advisors today.
A Roth IRA conversion—sometimes called a backdoor Roth strategy—is a way to contribute to a Roth IRA when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting.
To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.
This material is for informational purposes only and does not constitute tax, legal, or investment advice. Please consult a qualified tax professional regarding your individual circumstance.