Q. Under what circumstances should I consider taking Social Security income early instead of delaying?
A. Here are some circumstances you will be better off to take social security income early:
You can’t find full time work
Older workers may not have the highest unemployment rate but it takes them longer to find work once they are unemployed. If unemployment insurance has run out and you need the funds, taking Social Security income early might be an answer for you.
The good news is there is a way you can pay it back. If you take Social Security income and your circumstances change, you can “withdraw your application” even if you have been taking income. You can pay it back but note that you can only do this in the first year. Once you have taken benefits 12 months or longer, this option isn’t available.
You are working part time
You can still earn income when you draw Social Security early, there are limits though. In 2014, you can earn up to $15,480 a year and receive your early Social Security payment. Over and above that threshold, your Social Security payout is reduced by $1 for every $2 you earn. In the year you reach your full Social Security age, you can earn up $3,450 a month before you reach 66, without affecting your benefits. (In that year, it’s reduced by $1 for every $3 you earn over the limit).
The bottom line is if you earn more than the threshold, it doesn’t make sense to take your benefit early. Once you have reached your full retirement age, you can earn as much as you like from a job or business and it doesn’t affect your Social Security benefit.
You want your funds to go to a beneficiary
If your motivation is to pass assets on to someone you care about, you may want to take your Social Security early, then save or invest it. But remember, when you pass away, your spouse will get your monthly Social Security benefit if it’s higher than what he or she would otherwise receive. That’s why, when both spouses work, it often makes sense for at least one of them to wait until 70 and one to take benefits earlier.
You want to invest in something else
Assuming you don’t need the income and you aren’t earning more than $15,480 a year from working, you can always receive your benefit and invest it for yourself. Some retirees use the monthly Social Security benefit check to cover a vacation property or second home mortgage payment so they can enjoy having a special place for family and friends to gather or simply to enjoy some R&R during their retirement years.
You are single or don’t need to maximize your spouse’s Social Security income
A spouse receives their own Social Security benefit or half of their spouse’s benefit, whichever is higher. So this means, in some circumstances, the higher your benefit, the higher your spouse’s benefit. There are various strategies for maximizing couple’s Social Security income so if you are married, you want to make sure you aren’t shooting yourself in the foot by taking your benefit early.
When you have a short life expectancy
The question on everyone’s mind when waiting to take Social Security with the hopes of getting more income later is, how long do I have to live to make it up? Benefit evaluation calculators like the AARP or T Rowe Price’s can provide a personalized estimate for you.
A. Here are some circumstances you will be better off to take social security income early:
You can’t find full time work
Older workers may not have the highest unemployment rate but it takes them longer to find work once they are unemployed. If unemployment insurance has run out and you need the funds, taking Social Security income early might be an answer for you.
The good news is there is a way you can pay it back. If you take Social Security income and your circumstances change, you can “withdraw your application” even if you have been taking income. You can pay it back but note that you can only do this in the first year. Once you have taken benefits 12 months or longer, this option isn’t available.
You are working part time
You can still earn income when you draw Social Security early, there are limits though. In 2014, you can earn up to $15,480 a year and receive your early Social Security payment. Over and above that threshold, your Social Security payout is reduced by $1 for every $2 you earn. In the year you reach your full Social Security age, you can earn up $3,450 a month before you reach 66, without affecting your benefits. (In that year, it’s reduced by $1 for every $3 you earn over the limit).
The bottom line is if you earn more than the threshold, it doesn’t make sense to take your benefit early. Once you have reached your full retirement age, you can earn as much as you like from a job or business and it doesn’t affect your Social Security benefit.
You want your funds to go to a beneficiary
If your motivation is to pass assets on to someone you care about, you may want to take your Social Security early, then save or invest it. But remember, when you pass away, your spouse will get your monthly Social Security benefit if it’s higher than what he or she would otherwise receive. That’s why, when both spouses work, it often makes sense for at least one of them to wait until 70 and one to take benefits earlier.
You want to invest in something else
Assuming you don’t need the income and you aren’t earning more than $15,480 a year from working, you can always receive your benefit and invest it for yourself. Some retirees use the monthly Social Security benefit check to cover a vacation property or second home mortgage payment so they can enjoy having a special place for family and friends to gather or simply to enjoy some R&R during their retirement years.
You are single or don’t need to maximize your spouse’s Social Security income
A spouse receives their own Social Security benefit or half of their spouse’s benefit, whichever is higher. So this means, in some circumstances, the higher your benefit, the higher your spouse’s benefit. There are various strategies for maximizing couple’s Social Security income so if you are married, you want to make sure you aren’t shooting yourself in the foot by taking your benefit early.
When you have a short life expectancy
The question on everyone’s mind when waiting to take Social Security with the hopes of getting more income later is, how long do I have to live to make it up? Benefit evaluation calculators like the AARP or T Rowe Price’s can provide a personalized estimate for you.
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