When Should You Take Social Security Early?

 

Troy Sharpe:  Everyone’s telling you to take Social Security later, wait until age 70. What if I said, for many of you, it may make sense to take Social Security early at 62,  maybe 64, depending on your personal circumstances? We’re going to look at some of those reasons in this video today.

 

Hi, I’m Troy Sharpe, CEO of Oak Harvest Financial Group, CERTIFIED FINANCIAL PLANNER™ Professional (CFP®), and host of the Retirement Income Show.  When we look at taking Social Security early, and you’ve heard me say this before in these videos, taking Social Security is not a decision you make all  on its own. You have to make your Social Security decision with respect to everything else going on in your retirement plan. Social Security is a cog in the retirement wheel.

If you turn on the TV, if you read Wall Street Journal, if you listen to Suzy Orman or any of these sources, they’re probably going to tell you, you need to defer Social Security  until age 70. For many of you, that is absolutely the right choice, but for many of you, it could be the wrong choice. One of the reasons why we want  to take Social Security early possibly is maybe there’s a disparity in age between the husband and wife.

I recently had a client, he was about 70 years old, she was about  60. He expected to live to be about 85. If the wife waited until she was 70 to take her Social Security benefits, instead of  taking it at 62, by the time her husband died, she would be turning on her benefits almost. She would have lost 10 years of receiving  Social Security because whenever he died, her Social Security goes away, and she’s left with his.

If she would have deferred until age 70, that means she would have missed  out on many, many years of receiving income, putting that into the bank account or spending it and preserving assets, and her Social Security would have went away and she would’ve got his. Disparity in age,  one of the reasons why one of the spouses might want to take Social Security earlier.

If you have a shorter life expectancy. For most people, if you delay until age 70, you need to live to,  at least, age 80 before you even break even. That doesn’t take into account the time value of money. $1 today is worth more than $1 in the future.  When we account for the time value of money, plus looking at a possible shorter life expectancy, it probably makes a lot of sense for you to consider taking Social Security early.

If you have a higher capacity for risk. Check out my video Oak Harvest Retirement Process Step One, to learn about capacity for risk.  If you have a higher capacity for risk inside your portfolio, then it may make sense for you, if your risk tolerance is also high, to take Social Security early because  you can invest those dollars and theoretically over time, they could be worth a lot more.

I actually had a client come in to see me, he was 85 years old. This was about 10 years ago. He said, “Troy  I took my Social Security at 62. I bought 100% dividend stocks. Every month, I bought more dividend stocks. Today, I have a dividend paycheck  from all those investments that is higher than what my Social Security is. Plus, I have over $500,000 of the nest egg just sitting there if I need it for anything else.”  He had a high capacity for risk, invested in dividend stocks, now he has more income plus the balance for kids or medical costs or whatever comes up.

Legacy goals are important. If you find it important to make sure you give your children or grandchildren a step ahead and  opportunity because you think either taxes are going to be much higher in the future, that it’s going to be more difficult for them to get ahead in the future, or you simply want to help them out wherever you can,  legacy goals could be a priority for you, and taking Social Security early can help you preserve more of your assets as you spend that income. If you have a high capacity  for risk and can invest those, that should result in leaving more money to your children or grandchildren when you’re gone.

Of course, if you’ve  invested in other sources of guaranteed income, it’s not as important to delay Social Security until age 70. All of the experts are going to tell you we want to defer Social  Security or delay it so you have the maximum amount of guaranteed lifetime income. Well, if we’ve taken 10%, 20%, 30% of your money and ladder it  into a deferred income annuity portfolio, or some type of source of future guaranteed income, delaying Social Security till age 70 is not as important. We want to  probably take it early, preserve the asset base, take guaranteed income sources at different points of time in the future for inflation protection, and taking Social Security  early can help that plan come together a lot better, have a higher probability of success, and it’s just a more well-rounded plan.

These are not all the reasons why we want to take Social Security early,  but these are some really good ones that you may want to consider. Of course, talk to a professional. You don’t want to be navigating through Social Security or retirement planning decisions on your own. This stuff is complex.  It’s nuanced. Every single decision you make in retirement affects every other decision you will make in the future.

Retirement is like a set of dominoes, you make one decision and  it knocks over something else. Your income, your taxes, your account balances, your legacy, how much is left for medical costs, they’re all tied together. Make sure to hit the thumbs-up button. If you like this video, subscribe  to our channel so you can be updated whenever we upload new content. Of course, share this video with a friend or family member if you know someone that’s considering taking Social Security.