Social Security has a reputation for being confusing— and not just because of how your contributions look on your pay stubs and tax returns. It’s complicated because your Social Security benefits don’t always line up with your official retirement date.

You can decide when you want to start taking your Social Security benefits. Depending on when you were born, you might be eligible to start collecting payments as early as age 62. But you could also wait until you’re 70. And you don’t necessarily need to match your Social Security “retirement age” with the date that you stop working full time.

So when should you start taking Social Security? There’s no hard-and-fast rule — the answer depends on a range of factors.

How Early Can You Take Social Security?

When it comes to receiving your Social Security benefits, there are two ages to keep in mind: your “full retirement age” and the age you want to start collecting your payments. Taking Social Security “early” means starting your benefits any time before your full retirement age. You can use this chart to find your full retirement age. But basically, people born earlier have lower full retirement ages.

For example, if you were born between 1943 and 1954, your full retirement age is 66. However, if you were born after 1960, your full retirement age 67. Birth years in between have full retirement ages of 66 years and a certain number of months. If you were born in 1957, for example, your full retirement age is 66 and 6 months.

You can start receiving benefits when you turn 62. But that’s not necessarily the best option. When you start taking your benefits early (before your full retirement age), you will get less Social Security benefits on a monthly basis, which may not have an impact in your 60s, but if you live to your 90s, could have a big impact on your overall retirement and financial picture.

Your Social Security benefits are permanently reduced by 5/9 of 1% for each month before your full retirement age. And if you start more than 36 months before that full retirement age, you’ll lose a further 5/12 of 1% per month.

Let’s look at an example. If you were born after 1960, your full retirement age is 67. If you start taking Social Security benefits at 62, that’s 60 months early. You’d lose 30% of your total Social Security benefits! How?

  • (5/9 of 1%) times 36 months is 20%
  • (5/12 of 1%) times 24 months is 10%
  • Total reduction is 10% + 20% = 30%

If you wait until you are 67, you get the full amount of your retirement benefits. But if you start taking your payments when you turn 62, you only receive 70% of that Social Security money you’re entitled to!

How Long Can You Wait?

You don’t have to wait until your full retirement age to start collecting benefits (even though there’s a downside to taking early Social Security). But does that mean you must retire at 66 or 67? Not necessarily. You can choose to delay your benefits past your full retirement age.

Delaying your benefits has the opposite effect of taking Social Security early. You grow the total amount of your benefits based on the number of years you wait (until age 70). For each year you wait to receive benefits between your full retirement age and 70, you get an 8% credit. 

If you were born after 1960, your full retirement age is 67. If you wait to take your Social Security benefits until you turn 70, your total benefit is 24% (8% times 3 years) more than it would have been if you started receiving benefits at 67.

Social Security and Medicare

Although Social Security and Medicare are often intertwined, you don’t automatically receive one if you have the other. Depending on your unique circumstances, you may lose some of your Medicare benefits if you don’t sign up for coverage when you turn 65 — even if you delay Social Security payments. If you take your Social Security benefits early, you’ll automatically get enrolled in Medicare Parts A and B when you turn 65, but you won’t get coverage early.

Factors to Consider for Taking Social Security

What’s the best time to start taking your Social Security benefits? It all depends on your personal circumstances, financial goals, and health. Here are some of the most important considerations.

Marital status

If you’re married, you may choose to receive your spouse’s Social Security benefits instead of your own. When you reach full retirement age, you can take either 100% of your benefits or 50% of your spouse’s (whichever is more). If you’re widowed, you can take your full benefits or up to 100% of your spouse’s (whichever is more).

If you’re divorced, you may still be able to benefit from your ex-spouse’s Social Security. If you were married for 10 years or more, you may be eligible to take 50% of your ex’s full retirement Social Security benefits. 

Collecting Social Security benefits based on your spouse or ex-spouse can get complicated. A financial planner can help you figure out how to get combine your worker, spousal, and survivor benefits.

Life expectancy

When you just look at the percentages above, it seems like it’s always better to delay your retirement as long as possible instead of taking early benefits. But you also need to consider how long you expect to collect those benefits. If you start collecting benefits early, you’ll get smaller checks, but you’ll receive them for more years than if you want until 70. 

So consider your health and any medical conditions. If you expect to collect Social Security benefits for many years after you retire, it might be worth delaying. But if you are in poor health and think you might not have a very long retirement, it might make more sense to start collecting benefits early.

Employment plans

Another thing to think about is when you plan to retire from employment. It doesn’t necessarily have to align exactly with when you start collecting Social Security. If you wait until your full retirement age, you can start collecting your benefits with no penalty, even if you’re still working.

However, if you decide to start collecting Social Security early (before 67)  when you’re employed, your benefits will be temporarily reduced. While you are still working, your benefits will be reduced by $1  for every $2 you earn about the annual income limit. In 2023, that limit is $21,240. 

This isn’t the same as the permanent reduction from starting your benefits before you reach full retirement age. The work-income reduction is temporary — you get the higher amount after you reach your full retirement age. Don’t let your Social Security benefits be the sole deciding factor when you stop working full-time.

Cash and budgeting needs

Finally, think about your immediate financial needs. How much income do you need to pay your bills and maintain the lifestyle you desire? Could you meet those income goals with other resources, such as a pension or retirement portfolio? If so, you might want to delay your Social Security benefits. But if you need your Social Security checks to pay the bills, there’s nothing wrong with taking those benefits. You earned them!

Making the Best Use of Social Security

Figuring out when to start Social Security benefits can seem complicated. But it all comes back to financial needs, goals, and resources. If you need to stop working or cut back on your hours, it might make sense to start Social Security to fill the gaps in your income. But if you plan to continue working or have retirement income from other sources, waiting until 70 might be the right call. Don’t forget to talk with your CPA to see how your Social Security benefits will affect your taxes

It’s never too early to start planning for retirement — but it’s never too late either! No matter how old you are, you can make financial choices to support the retirement you want. A Certified Financial Planner™ can help you make a plan to maximize your Social Security benefits and any other retirement assets you have.

The Guiding Wealth team is here to help you plan for retirement — whether you’re already in your 60s or just starting your first job. We’ll help you understand all the options and decide which ones align best with your values and goals. To get started, call 214-810-3835 or schedule an appointment online