Done correctly, retirement planning is a process that spans most of your working life. The right savings, the right investments, the right home purchase–all are steps along the way to ensuring that your retirement becomes all you hoped it could be. For those of us moving closer to that life milestone, questions abound as to when and how to make certain moves. Among them is the decision on when to start taking Social Security. It’s a more complex question than it may appear, and the right answer for you may depend on many other aspects of your financial situation and retirement plan.
Let’s address an obvious question first: you can begin claiming Social Security at the age of 62–but should you? The answer for most people will be “no”. For most of us, the full retirement age is 66 or 67. This is the point at which you may start drawing your full Social Security benefits, rather than the reduced ones that are available at 62. The catch however comes when you understand that if you do begin drawing reduced benefits early, you permanently reduce your full benefits by about half a percent. That’s a significant loss over the course of a long retirement. Compounding the issue, if you are still working while collecting your early benefits then you may see some of your Social Security withheld. There exists an earnings test in place for early Social Security benefits, and up to half of your benefits may be withheld if you are still earning over a set amount. What counts as income also varies, so seeking the advice of an experienced retirement planning specialist might be a wise move here.
Marital status looms large in both retirement planning and Social Security benefits and needs to be taken into account with both. For those considering drawing Social Security, your spouse’s work history will factor into the benefits you receive. Married people who lack enough of a work history to qualify for their benefits may receive Social Security retirement benefits pegged to their partner’s. This can amount to up to 50% of their spouse’s primary insurance amount or PIA. The PIA is the full, unrestricted Social Security benefit received by an individual, so the impact it has on a spouse’s benefit is substantial. In addition, spousal benefits are always based on the full PIA, whether or not the primary recipient is drawing that entire amount or not. Once again, these are tricky waters to navigate, and finding your way may take some planning.
There are more nebulous considerations when considering drawing Social Security. Are you overall healthy? If so, waiting till full retirement to draw your benefits may make more sense. Do you have an immediate use for the money? If you’re still working and supporting yourself that way, delaying drawing Social Security may once again make sense.
It’s a tricky decision, and there are unforeseen pitfalls and opportunities alike. Professional help in all aspects of your retirement planning can help you make the most of both the opportunities before you and the golden years ahead. At OmniStar Financial, we’re here to help illuminate the blind spots on your path to retirement. So whether you’re planning investments, savings, or something more, get in touch today, and let’s start you on your journey to success.