How do you determine when to start social security? There is mixed advice everywhere... Many generalists are willing to tell you how you should do it, usually based on how they‘ve done it.
- The analytical type will say “delay it as long as possible (age 70) and get the roughly 8% increase per year by delaying from full retirement age (FRA) to age 70.”https://www.ssa.gov/benefits/retirement/planner/delayret.html
- The emotional type will say “take it right away and get your money before you die.”
Both are right… sometimes! And really, I would argue this isn’t a right or wrong decision.
Beginning Social Security is a “breakeven analysis,” which is why the same answer is not the right solution for everyone. I truly believe you need to look at multiple scenarios to arrive at peace about the decision. Some situations are cashflow driven, when the individual(s) don’t have the luxury of delaying or their obligations won’t be fulfilled. Conversely, some individuals have invested assets or cashflows that they are using instead of social security. What if the opportunity cost of using other available resources is greater than the advantage you receive by waiting?
Because each client’s life and priorities are so different, this requires a much bigger conversation, and arriving at the answer requires a deeper analysis. Being able to ask the right questions and bring all the pieces of your financial life into the equation to isolate the Social Security variable allows us to ultimately forecast future outcomes.
As an advisor my goal is to simplify these situations for people, but not through generalized oversimplification. Let’s start with a list of thoughtful questions:
- What is my lifestyle/ health prognosis?
- What is my family’s health history?
- Am I someone who is more comfortable with “certainty”, or can I tolerate “uncertainty” as it pertains to my personality?
- Do I understand my expenses at least generally, to the point where I can forecast my need for the next 20-30 years?
- How will drawing social security impact my taxes, or will it?
- What is my opportunity cost(s) by using my current assets, compared to beginning Social Security?
- Am I still working, and will I continue? Why it matters
- What will the benefit be for my spouse if something happens to me?
- Am I working with an advisor who has the capability and competence to think through this holistically?