When is the best time to take Social Security?

Many factors contribute to the “best” time to take Social Security including the unknown of when you will pass away. Let’s assume you live to your life expectancy for the sake of argument.

To save you the brief read, I find for most people, delaying to age 70 results in the highest expected benefit from Social Security and the biggest impact on retirement spending overall. A secondary strategy would be for the spouse with the higher benefit to delay to 70 and the other to take at their full retirement age, likely to be 67.

Social Security's Core Purpose

Let’s take a step back and understand what Social Security is designed for. At its core, Social Security is intended to provide a financial safety net, preventing poverty for those who can no longer work. It offers a guaranteed monthly payment from the time benefits start until death. Additionally, spouses and sometimes minor children may also receive benefits upon the recipient's passing. An annual Cost of Living Adjustment (COLA) is included, ensuring that monthly benefits can increase with inflation, providing vital protection in retirement.

Why Taking Social Security Early Might Be Costly

Taking Social Security early, such as at age 62, can have drawbacks. Firstly, the monthly benefit is smaller compared to waiting. While receiving benefits sooner may seem appealing, the advantages often end there. If you are still working, you may face penalties for earning too much income while receiving Social Security.

For 2025, if you earn more than $23,400 and are receiving benefits before your Full Retirement Age (67 for most people today), your monthly benefit is reduced $1 for every $2 you earn above the limit, and then $1 for every $3 over $62,160. Additionally, both earned income and Social Security benefits are considered taxable income, potentially leading to further financial hits.

Simply put, if you're still working, your Social Security deposits may be smaller than expected due to both penalties and taxes.

Benefits of Delaying Social Security

Delaying Social Security until your Full Retirement Age (FRA) means receiving your full benefit without the earned income penalty. Furthermore, for every year you delay beyond your FRA (up to age 70), your benefit increases by 8% per year, guaranteed. This is a significant return that is hard to find elsewhere.

Delaying until age 70 can result in a substantially higher monthly benefit. Consider the impact of the cost of living adjustment (COLA): if inflation is 5%, a $50,000 annual benefit at age 70 increases by $2,500 per year, while a $30,000 annual benefit taken earlier would only increase by $1,500.

Many financial plans show that delaying Social Security is a critical factor in avoiding running out of money in retirement. This is particularly important for the higher earner in a couple, as the surviving spouse keeps the higher of the two benefits, providing long-term protection.

Does Delaying to Age 70 Mean I Need to Work to Age 70?

No. So where will my income in retirement come from? Your investments. Social Security is only a supplement to your retirement income. In between the time you retire and when you collect Social Security you can lean on your investments, then when you start collecting you can reduce the amount of withdrawals by what you get from Social Security. Your Social Security FRA is just a number, when you are able to retire is a product of what your income needs are and what your investments and income sources can produce. Some people are prepared to retire at 50 and others are not yet ready at 70.

Key Considerations

Social Security is meant to provide a financial safety net, and for many, delaying can significantly enhance its value, sometimes adding hundreds of thousands of dollars in projected lifetime benefits. However, delaying is not always the right move for everyone.

The information in this blog is the opinion of Nathan Tomkiewicz and does not reflect the views of any other person or entity unless specified. The information provided is believed to be  reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through Tomkiewicz Wealth Management, LLC, an investment adviser registered with the State of New York.