Dear Liz: Most of the questions you answer about Social Security come from people who don’t have a lot of money saved. I agree with your advice that those people should delay starting benefits. That way their Social Security checks, which will be the bulk of their income in retirement, will be as large as possible. But what about those of us who won’t need the money? I will receive a good pension and thanks to real estate investments, my retirement income will exceed my current income should I retire at age 62. That means I will never have to touch my capital. I do not have any other debt and am fully insured.
My initial thought is that I should take Social Security as soon as I’m eligible and use it while I’m in good health for travel and other activities. A friend who is in a similar situation says to wait and enjoy the emotional safety that if the need arises, I can turn on the Social Security tap later and let some more money flow. If you don’t need the money now or later, but could have more fun earlier, should you take Social Security sooner?
Answer: The less you’ll need Social Security, the less it matters when you start it.
Starting benefits early locks you into lower payments for life and will result in significantly smaller lifetime benefits for most people. That’s in part because Social Security hasn’t adjusted its payment formulas even as life expectancies have expanded, so most people will live beyond the “break-even” point where delayed benefits exceed the amounts they could have received had they started earlier. Delaying benefits is particularly important for married people, since one partner is likely to outlive the other and will have to get by on a single check. Making sure that check is as large as possible will help make the surviving spouse’s final years more comfortable.
But all that assumes that you, like most people, would receive half or more of your retirement income from Social Security. If your Social Security is truly icing on the cake — you don’t need the money now, you (and your spouse) are unlikely to need it in the future, and you don’t care about maximizing your lifetime benefits — then start it whenever you want.
- Can life insurance be used as an estate planning tool? Dear Liz: I am 70 and my wife is 59. My pension covers us for both our lifetimes. We have no debt. My wife and I do not need the required […]
- Q&A: Paying off home loan with a windfall Dear Liz: I'm 65 and my wife is 62. We recently sold a business for over $900,000 and will net somewhere between $550,000 and $600,000. […]
- Q&A: Maximizing retirement benefits Dear Liz: I don't know where to turn. My husband is 76. He has a federal government pension and collects Social Security but he has only a […]
- Q&A: Inheritance vs Reality Dear Liz: I have really bad credit. I always have because I have never really had any money. So now I am inheriting a lot of property and […]