Claim It Early or Delay? When to Start Taking Social Security

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published 15 December 2024

Social Security is the largest source of income for many retirees and a critical monthly money stream available to all Americans who have paid into it for 10 or more years. Understanding the program is important to maximizing benefits, but claiming rules are complicated. If people aren’t knowledgeable enough about Social Security, the decisions they make about it can prove costly.

I’ve helped hundreds of pre-retirees determine when they want to start Social Security. Here are the top three reasons I see people choose to delay, and the top three reasons I see people choose to take it early.

1. To protect a surviving spouse. Are you including in your planning what it looks like when one spouse passes away and the surviving spouse now has only one Social Security benefit moving forward? Even if a lower-earning spouse claims at the age of 62, they take over whatever the primary-earning spouse was getting after the primary-earning spouse passes away.

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One common scenario is when the husband works throughout his entire career while his wife stays home with the kids. In this case, the husband’s Social Security benefits are often higher. In that scenario, it can make sense to start the wife first with Social Security and delay the husband’s benefits to protect the wife should her husband pass away first.

Delaying Social Security also mitigates the risk of outliving your money. If longevity tends to run in your family, it may make sense to postpone taking Social Security.

2. To maximize monthly cash flow. If a family hasn’t accumulated a large enough nest egg to meet their monthly expenses, one common approach is to continue working until age 70, thereby maximizing their monthly Social Security benefit. The reality for a lot of people is that they need to maximize the amount of cash flow coming from Social Security because it’s not coming from anywhere else.

3. To improve tax efficiency. Social Security may be taxed depending on how much income you make in a given year. That said, Social Security is still more tax-favorable than other ordinary income because the worst-case scenario is that 85% of the amount is taxable (as opposed to 100% of your income from a 401(k), IRA, pension, annuit y and so on) So, the greater the amount of your needed income that comes from Social Security, the better off you will be from a tax perspective.
For those who are looking to make strategic Roth conversions, delaying Social Security can reduce your taxable income during the years you convert to a Roth, which can lower the tax impact of the conversion.

1. You want to retire early, but don’t want to draw down on the nest egg right away. It’s challenging to go from your accumulation years, when you are saving for retirement, to your distribution years, when you begin to spend what you saved. Psychologically, you have to flip your mindset, and because the future is uncertain, many people who retire early become anxious about spending the assets they’ve saved. One thing that can alleviate a part of this for a lot of people is to start Social Security sooner so they can postpone dipping into their retirement assets.

Another popular strategy is to plan to delay Social Security. Then if the market drops significantly and your nest egg goes down, you can turn on Social Security earlier than you anticipated to avoid drawing down on losses in your portfolio.

2. You don’t want to risk passing away before you’ve received what’s rightfully yours from Social Security. Unfortunately, if you pass away while waiting to maximize your Social Security, your loved ones don’t get a giant check for all the money you put in. Instead, that money is redistributed into the system. Because of this, a lot of people say, “Why take the risk?” and start Social Security early.

3. You want to use the money during the “go-go” years. There’s a retirement philosophy called the Retirement Smile. Basically, it describes the idea that you are likely to want to spend more money and do more things in the early years. Then in your 70s, that desire starts to slow down, so your spending will likely go down. But depending on what happens with your health, expenses can rise in the later years.

Understanding the tradeoffs

There’s no such thing as one right decision that applies to everybody. Deciding when to take Social Security is like any big decision — it’s a series of tradeoffs. My goal is that my clients understand the tradeoffs before making the decision.

It’s always important to have an income plan that includes Social Security. Whether you take it early or delay, how does Social Security fit into your income plan?

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a public relations program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Matt Johnson is the founder of Roots First Financial. A CPA and a National Social Security Advisor who specializes in retirement planning, he puts an emphasis on tax planning and Social Security in retirement. He is also the founder of the Social Security Education Center, a registered 501(c)3. Johnson is a graduate of Brigham Young University, where he earned bachelor’s and master’s degrees in accounting. He began his career in Big 4 public accounting with Ernst & Young. He also holds insurance and securities licenses.