Thinking of Taking Social Security Early? What to Know

4 Min Read

Social Security is a critical source of income for many Americans in retirement, and it’s tempting to take early benefits to supplement your income. However, there are some important things to know before you decide to take Social Security early.

  1. Understand how Social Security benefits work

Social Security benefits are calculated based on your lifetime earnings. If you wait until your full retirement age to start benefits, you’ll receive your full retirement benefit. If you take benefits early, your monthly benefit will be reduced. The reduction is permanent, and the percentage depends on how early you take benefits.

  1. Know your full retirement age

Your full retirement age (FRA) is the age at which you can receive your full Social Security benefit. For those born in 1960 or later, the FRA is 67. If you were born before 1960, your FRA is between 66 and 67. If you take benefits before your FRA, your benefit will be reduced.

  1. Consider your life expectancy

One of the biggest factors to consider when deciding when to take Social Security is your life expectancy. If you’re in good health and have a family history of longevity, it may make sense to delay benefits to receive a higher monthly benefit over time. On the other hand, if you have a serious health condition or a family history of shorter lifespans, it may make sense to take benefits early.

  1. Understand the impact on your spouse

If you’re married, your decision to take Social Security early can impact your spouse’s benefits. If your spouse is eligible for spousal benefits based on your work history, taking benefits early can reduce their monthly benefit as well.

  1. Consider your retirement income needs

Before you decide to take Social Security early, consider your retirement income needs. If you have other sources of retirement income, such as a pension or savings, you may be able to delay Social Security and receive a higher monthly benefit. If Social Security is your only source of retirement income, taking benefits early may be necessary to meet your financial needs.

  1. Understand the earnings limit

If you decide to take Social Security early and continue working, be aware of the earnings limit. If you earn more than a certain amount, your Social Security benefit may be reduced. For 2021, the earnings limit is $18,960 per year if you’re under your FRA. If you earn more than that, your benefit will be reduced by $1 for every $2 you earn above the limit.

  1. Consider the long-term impact

Finally, it’s important to consider the long-term impact of taking Social Security early. While you may receive a higher total payout if you take benefits early, you’ll also receive a lower monthly benefit. This can impact your financial security in retirement, especially if you live a long time.

In conclusion, taking Social Security early can be a tempting way to supplement your retirement income, but it’s important to consider the long-term impact on your finances. Before you make a decision, understand how benefits work, know your full retirement age, consider your life expectancy and retirement income needs, understand the impact on your spouse, be aware of the earnings limit, and consider the long-term impact. By carefully weighing your options and considering your personal situation, you can make an informed decision about when to take Social Security benefits.

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