Taking Social Security Before Full Retirement

Occasionally in the past we have been guests on Wharton’s “Your Money” Sirius Satellite Radio show with Professor Kent Smetters.

Kent and many of his guests are stanch advocates of waiting to take Social Security until the VERY last possible minute.

Just like we believe there is not a product that is correct for everyone, there is also frequently not items that are incorrect for everyone!

Taking Social Security Before Full Retirement

Gasp… Kent and most of his guests not only would encourage many to wait until the maximum delayed time for Social, but certainly not advocate early commencement-

Before we begin, here is a MOST conservative chart of the 2018 Maximum Social Benefits cross over chart comparison of starting at age 62 versus age 66 – again maximum amounts at both ages-

2018 Social Security Crossover

At age 82 it was a bad decision to take Social Early, Or was it?

Here are our thoughts on the situation:

  • Single Folks – You have the most to think about as there is no spousal situation to concern you – Frequently early distributions make more sense especially to single folks
  • Health – If your health is suspect, it may make sense to take benefits early to get some benefits sooner rather than later
  • Quality of Life – Generally we move a little faster today than tomorrow – While we never know the decay of that speed, it is worth thinking about
  • Overall Financial Plan and Liquidity – If taking benefits early helps the liquidity of one’s plan and in many cases can help the long term overall asset growth, a consideration should be made

Things to Consider when taking Social Early

Remember you can’t go back to work until full retirement age. There is a penalty for earnings that kicks in at $17,040 – Translation – You can not EARN more than $17k from an employment type of situation (not including IRA distributions, pensions and the like) and not have a taxable penalty, basically nullifying the benefit to taking Social. This earnings penalty fades away once you hit full retirement age, which is 66 in most cases currently.

If you are married, and your spouse has little or no earnings credits, early Social commencement may limit your spouses eventual benefit, especially there is a large disparity of age – Translated – Upon death your spouse can receive your full benefit, prior to death 1/2 of your benefit – If one takes benefits early, it may reduce the benefits of a greatly younger spouse.

It is not an easy decision as the only way we know the best decision is to know the day we go room temperature! Otherwise it is somewhat a of a bet, but a bet with odds that we can ascertain in advance.

Bottom line, we just want to be clear, it is not ALWAYS the best “bet” to wait until the VERY last minute to take Social benefits.

Wash away the possible stigma that socially many have for taking Social early, it may be a good “Bet” many times!

Have a Great “Maximized Social Security Benefit” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

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