When Should You Take Social Security?

The ages between 62 and 70 are a critical time for determining how and when to take Social Security benefits. There are many options when it comes to this program, and which option is best for you will depend on your specific situation.

The Full Retirement Age (FRA) for beginning Social Security benefits is age 66 for those born after 1943; it is age 67 for those born after 1959. You can take reduced benefits starting at age 62.

If you live to your average life expectancy, the total dollar amount you will receive if you take reduced benefits early is equal to the total amount you will receive if you wait for higher benefits at your FRA. A variety of factors will help you decide which course is better for you, including what your income needs are and what you believe your actual life expectancy is compared to the average assumed by the Social Security Administration. You can even delay benefits beyond your FRA, up to age 70. Each year that you defer benefits past your FRA, your benefit will increase about 8% per year.

Spouses are also eligible for benefits based on their partner’s record, whether or not they earned Social Security themselves. If you do not have enough credits to earn Social Security on your own, you are entitled to one-half of your spouse’s benefit if you’ve been married more than one year. Even if you did earn enough to qualify for Social Security on your own, you are still entitled to half of your spouse’s benefit, if half of his/her benefit is larger than your whole benefit. You can even get a benefit on the record of your deceased spouse or ex-spouse if you were married more than ten years and have not remarried.

If you earn money while taking Social Security, your benefits may be reduced. The amount of the reduction depends on your income. The chart below gives the 2021 earnings threshold for Social Security reductions. The reduction is dramatic if you take the benefit before your FRA while still working.

Age Earnings Threshold Reduction of Benefits
Under FRA $18,960 Your benefits will be reduced by $1 for every $2 you earn above the earnings threshold.
In the year you reach FRA $50,520 Your benefits will be reduced by $1 for each $3 earned above the earnings threshold.
After FRA is reached $0 There is no benefit reduction due to earnings.

In addition to having your benefits reduced if you have earned income, your Social Security benefits can also be taxed. Below is a table that gives 2021 earnings threshold for taxing social security benefits.

Taxpayer Status Annual Income (including ½ of benefits) Amount of benefits that are subject to income tax
Married filing jointly Combined income is greater than $32,000 50% of benefits are taxable
Married filing jointly Combined income is greater than $44,000 85% of benefits are taxable
Single filers Income is greater than $25,000 50% of benefits are taxable
Single filers Income is greater than $34,000 85% of benefits are taxable

If you have questions, the Social Security Administration is a good place to start. You can contact them at www.ssa.gov or 800-772-1213. Your financial advisor can also help you determine what the best course of action is for your specific set of circumstances.

For more, I encourage you to read my colleagues’ articles, “How Social Security Fits Into Your Retirement Plan” and “How Do I Apply for Social Security Benefits?

Harli Palme, CFA, CFP®
Chief Operating Officer, Chief Compliance Officer

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