Dear Kim,
I’m 63 and widowed. I keep hearing I should delay taking Social Security, but I’m also watching my savings shrink. How do I know when it’s the right time for me to start drawing benefits?
Sincerely,
Considering and Conflicted
Dear Considering and Conflicted,
There are tools and programs that can show you your break-even point for taking Social Security early versus waiting. Remember, for every year you claim before your full retirement age (FRA), your benefits are reduced. For every year you wait past your FRA, you earn an additional 8%—up to age 70. There’s no financial advantage to waiting beyond 70.
When deciding when to claim, consider a few personal factors: How long did your parents live, or are they still living? Do you have any medical conditions that might shorten your life expectancy? These can help you gauge whether delaying benefits makes sense.
If you’re still working, keep in mind that Social Security will reduce your benefits if your earnings exceed $23,400. They deduct $1 for every $2 you earn above that amount. For most people who are still employed, I recommend waiting to claim until they retire. Once you reach your FRA, there’s no limit to how much you can earn while still receiving your full benefits. In the year you reach FRA, the earnings limit is higher—$62,160—and only applies to the months before you hit your FRA.
Also, take a close look at your budget to see whether you can cut expenses and avoid drawing down your savings too quickly. A financial planner can help you run the numbers and evaluate different scenarios so you can make the decision that’s best for your situation.
Kim
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