What's the Best Time to Start Drawing Social Security?

The temptation is great. Maybe too great for some.

The federal government allows retirees to start drawing Social Security as early as age 62, a feature that more than 40 percent of Americans take advantage of as they gladly draw from the system they spent a lifetime paying into.

But many of those people may be making a mistake, says Reid Abedeen, a partner at Safeguard Investment Advisory Group, LLC (www.safeguardinvestment.com).

“While you’re allowed to start drawing Social Security when you are 62, your monthly benefit will be reduced,” Abedeen says. “Although there might be personal reasons why someone needs to apply early, for most people it’s probably better to wait at least until their full retirement age.”

Full retirement age is between 66 and 67 for most people in the workforce right now. Wait until you are 70, and the amount of your monthly check goes up even more.

When it comes to Social Security, though, there’s a financial monkey wrench that can complicate sorting out your plan. Social Security rules can be complicated and even your spouse’s income and decisions can affect when the most opportune time is for you to draw benefits.

“You really are going to want to coordinate what you do with what your spouse does, to make sure you are getting the highest amount possible,” Abedeen says.

Here are a few points to remember if you’re considering claiming your Social Security at 62:

Reduction of benefit. Depending when your full retirement age is, you would see about a 25 to 30 percent reduction in your benefit if you retire at 62. On the other hand, if you delay collecting past full retirement age, you can increase your benefit by 8 percent a year up until you are 70.
Life expectancy. One reason many people opt to draw the money early is they fear they will die before they get a chance to receive anything at all from Social Security. After a lifetime of paying into the system, they won’t get a penny out of it. They don’t want to feel cheated out of what they have coming to them.

That’s certainly a concern, Abedeen says. But there’s an even greater concern than dying early, and that’s living too long. “Life expectancies are growing, but many people have not saved enough to see them through a retirement that could last two or three decades or longer,” he says. “If you live a long life, it could be crucial to you that the monthly Social Security payment be as large as possible.”

Continuing to work. You could be in for a surprise if you plan to continue working after you begin drawing Social Security. If you haven’t waited until your full retirement age, there’s a limit on how much you can make. In 2015, that limit is $15,720, according to the Social Security Administration. If you go over that, you would be deducted $1 in benefits for every $2 you earn over the limits. (That changes in the year you reach full retirement age, and beginning with the month you are at full retirement age there is no limit on your earnings.)

“A lot of factors come into play when you’re trying to decide when to begin drawing Social Security,” Abedeen says. “That’s especially true if you have a spouse and need to factor them into the equation. It’s worthwhile to seek professional advice so you can get the most favorable result.”

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Reid Abedeen is a partner at Safeguard Investment Advisory Group, LLC (www.safeguardinvestment.com). As an investment advisor, Abedeen has helped retirees for nearly two decades with issues such as insurance, long-term care planning, financial services, asset protection and many other areas. He holds California Life-Only and Accident and Health licenses (#0C78700), and holds a Series 65 license, and is registered through the Financial Industry Regulatory Authority (FINRA). Abedeen is a family man who owes much of his fulfillment in life to his wife, Smyrna, and his three children, Yusef, Leena and Adam.