This is a question that I am often asked. Conventional wisdom says to wait as long as possible, but these are not conventional times. Many baby boomers today think they should take benefits now while they can, and there are more people taking early benefits. There is much discussion about Social Security reform, increasing the retirement age, and reducing benefit payments based on needs. From my calculations over the years, it seems that the breakeven point by delaying benefits is between 77-80 years old depending on your particular situation. The longer you live past the breakeven point, the greater financial return.
The two fundamental and basic questions you have to start with to make the determination:
- How much will my retirement investments earn after inflation?
- How long is my life expectancy, or said another way, how is my health?
After you answer these questions, the planning can begin. If your health is good and you have adequate retirement assets, chances are you will defer benefits. If your health is poor and you have no retirement assets, then you basically have no choice but to draw benefits early.
Some clients forego the planning and take the benefits as soon as they can regardless of other factors based on the premise that, yes they will have more money when they hit the crossover point, but they won’t be able to enjoy the additional money as much they would at age 62.
This question has no right or wrong answer, unless you have a crystal ball. Here is a good starting point to make initial calculations: http://www.ssa.gov/retire2/index.htm
We at Schlabig & Associates can help you refine this decision with the proper planning tools.