How do you decide when to take Social Security?

Starting Social Security payments is a big decision. If you take benefits before your full retirement age (FRA), you’ll receive a lower payment. But the extra years you’d receive benefits may make up for the fact that the payments are lower.

Social security & retirement age

Figuring your break-even age will help you determine whether the extra payments you receive by starting early outweigh the higher payments you would receive by starting later.

Use the Social Security Administration’s break-even age resource to help you decide when to begin receiving benefits. You’ll need your benefit amount at the retirement ages you want to compare. There are a couple of ways to get that information:

• Get your Social Security statement
• Get an estimate of your monthly benefit

How long will you live?

Once you find your break-even age, you must consider your life expectancy. Are you in good health? What’s your family history? Do you have dangerous hobbies? 

If you expect to live longer than your break-even age, you may want to consider delaying the start of your retirement benefits. If you don’t expect to reach your break-even age, you may want to consider starting your retirement benefits earlier.

What you don’t want to do is outlive your income. This is known as longevity risk. 

Will Social Security be around for you?

The government is considering the following possible changes to avoid a Social Security crisis:

• Increasing the full retirement age for receiving benefits
• Increasing or eliminating the income wage cap on taxable income
• Increasing Social Security payroll taxes
• Linking Social Security cost-of-living adjustments (COLAs) to different inflation indexes

Just keep in mind that Social Security usually provides about one-third of a retiree’s income. So at least two-thirds of your retirement income needs to come from other sources such as personal savings, investments, employer-sponsored pension programs, traditional and Roth IRAs or a 401(k).