Life is full of mysteries. We navigate through and around some complicated things. It's no surprise that the last chapters of life have their own question marks.
How and when to take Social Security is one of those mysteries.
My cousin, Lu Ann Curlee, is a CPA, in Woodbury, TN. When I talked to her about this, her answer was, " Take it when you need it. That's what I did."
LuAnn removed most of the variables from the conversation, and kept it simple.
Now closer to 60 than 50, I have been thinking about this question for a long time. I've done some research, talked with friends, even put the question on my facebook wall and got some great opinions. Then I looked back at my home made spreadsheets, considered mortality rates, family history, current savings, etc. etc.
LuAnn's answer brought me to a different place, and different decision point. It became a quality of life choice, and a feeling of need, vs. a mathmatical process.
Each year you wait, your monthly benefit increases by about 8%. If you wait three years, you get a 24% raise.
Once you start taking your Social Security monthly benefit, you are locked in. The exception being, small annual cost of living adjustments.
If you want to make it more complicated, it's easy to do. There are plenty of things to agonize over.
Availability of work. Your willingness and ability to work. Health situation for you. Your parent's longevity. Your longevity expectations. Lifestyle goals in retirement. Current Debt. Maybe you have a spouse, significant other, dependent child or parent. You have to consider their variables. Another biggie is Nest Egg management.
Let's consider Nest Egg Management...
Assuming you have a Nest Egg, or retirement account set aside...Are you trying to preserve that? Do you have kids, grandchildren, or a church or charity you would like to pass some of your wealth on to?
Side note...You can gift annually, as of 2023, 17,000 dollars without creating a tax obligation. There is no reason to wait to be a Giver, and bless others financially, if you can afford it.
A more in depth description of gift tax details... https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates
Back to considering your Nest Egg: Are you willing to spend part of your retirement savings, in a trade off for that 8% SS annual raise for each year you wait?
The math can work for either scenario. The question is more of philosophy.
Option one...Take the SS early, for living expenses, and try to preserve your retirement funds for later.
Option two...spend part of your retirement early, for living expenses, and try to preserve your higher SS benefit for later.
Option three...On the other hand, If you have been unable or unwilling to save for retirement, you have no choice in the matter. In that case, take the early benefit, and use whatever savings and investments you have to survive. Continuing to work full time, or part time as long as you can may be your reality. If that sounds like you, chances are you are already thrifty, and used to making ends meet. Your retirement senario will be no different. Some of the happiest people I know are in this group. They have kept things simple. Some are generous Givers. For the most part, they don't seem to worry too much.
Getting that nest egg started at a early working age is the most important part of this conversation. Do that, and you have more flexibility, and choices later on. So save like crazy now! Let the miracle and math of compounding interest work in your favor. This link is to another story that talks about the Rule of 72, Dollar Cost Averaging, and other details not gone into here. This talks alot about how to get started... https://rdside.blogspot.com/2021/05/time-to-build-retirement-boat.html
Consider how long your nest egg will last, with conservative investments, and regular withdrawals. I use 3% to calculate my withdrawal rate. Some people are comfortable with 4%.
For every 100,000 of a nest egg, a 3% draw gets you 250 a month. A 4% draw rate gets you 333 a month. Scale it up from there. If you have 500,000 multiply 250 x 5 = 1250 a month, at a 3% draw rate. The idea is to not destroy the nest egg with withdrawals, and keep earning some interest to go back into the balance.
Not sure what your Social Security benefit will look like? The SS website is helpful. Create an account, and see what your future benefit looks like. the link... https://www.ssa.gov/
Long before I talked to LuAnn, I made a spreadsheet to show the break even points for the different ages to take SS. This "If," "Then," chart considers our age at the time we pass away...
If - Expiration Age then - the Best time to Start SS is
up to 73.5 62
73.5 to 80 65
80 to 82.5 67
more than 82.5 70
If I expire before age 62, you folks will benefit from my early out by having my SS contributions available to you.
A person can read books and articles about when to take Social Security. Educating oneself is always a good thing. Still, a person has to stick a wet finger in the air and make a guess. The winds of longevity may blow, or not. We all have to put our stake in the ground, and choose to start drawing Social Security, or choose to wait.
The more I try to make my own logical, evidence based plan, the more I like Lu Ann's advice.
When to take Social Security? Take it when you need it.
Complicated questions don't always have to have complicated answers. A good CPA can help us navigate through some of life's mysteries.
Lu Ann Curlee, CPA, linkedIn page with contact information...
https://www.linkedin.com/in/lu-ann-curlee-32371832/