Social Security Planning

Aged 62, 70, or somewhere in between?

Social security planning a a topic for many people have to consider as they approach retirement. Many people wonder if social security is something that they should take early at 62 or wait until 70 for the bigger payout.

There are pros and cons to both options, we're here to break down some of the factors involved with social security planning.

Social Security is a critical part of retirement planning

What Is Social Security Planning?

Social security planning is determining the social security benefits that you will choose to receive in retirement. This calculation involves many factors, but social security planning primarily revolves around three main questions:

- At what age should I take social security?

- How much money will I get and how will that impact the rest of my retirement plan?

- How will my taxes be effected based on the age I claim social security?

Early vs. Late Claiming Social Security Benefits

The first factor to consider when social security planning is whether to claim social security early at age 62, late at 70, or somewhere in between. There are pros and cons to all options so you need to carefully weigh your options before making a decision.

Taking it early or taking it late can both impact your retirement, here's an example:

When you take social security early at age 62, you will receive a reduced annual payout. The benefit reduction is 6.6% for each year between age 62 and your normal retirement age (67 for most people).  So if you claim social security early at 62, you will get only 76% of what you would have gotten if you waited until 67 to draw social security benefits.  Of course, this reduced social security check comes every month. Some individuals prefer the certainty of having money coming in every month, even if it's less than they would have received had they waited until their full retirement age.

Whether you choose to retire at 62 or 70, the choice matters a lot

What needs to be considered in social security planning?

When you decide to claim social security there are many factors to consider. Some people choose to take social security at 62, since it is the earliest age they can receive social security.

However, social security planning means considering more than just social security payout amounts and options with social security planning. You need to also look at the full picture of all your resources so that you understand how taking social security at 62 will impact your retirement lifestyle. This includes looking at how much money you have saved for retirement in addition to what you will be getting from social security.

If you live frugally during retirement then it's possible that delaying social security until 70 would result in a significantly larger monthly payment than if taken around 62 or 65 (the current "full" social security accepted age is 65, but it will increase to 66 gradually by 2022).

If social security planning is your only plan then you should consider maximizing social security benefits.

You will want to consider how long you are likely to live. If you live into your 80s or 90s then taking social security later could amount to a lot more money than if begun earlier. One resource that can help social security claimants understand options with social security is a well-trained social security and retirement planner.

What age should you take social security?

When should social security planning begin?

Generally social security planning should begin several years you are eligible to claim social security benefits. The Retirement Planning Institute recommends you start around age 55.

The earliest age that you can claim social security is 62 years old. Social Security rules have changed over time so it's important to become familiar with options available when claiming social security benefits at different ages.

What are the factors in social security planning?

There are many factors involved in social security planning including: marital status, number of dependents if any, other sources of income other than just your own personal resources saved for retirement, whether this is a second marriage or not. There are also disability related social security social security planning benefits.

One of the most important social security planning factors is your life expectancy, or how long you are likely to live. You can get an idea about this with social security calculators like this one at CNN Money that takes into account gender and date of birth. A social security representative can provide more detailed social security analysis based on your personal circumstances.

What else should be considered in social security planning? There are some other major ramifications for social security planning beyond just monthly payments. You should consider whether social security is best used as a foundation for retirement income (which it's designed to do) - if so then delaying social secuity benefits until age 70 could make sense since it provides a baseline of income upon which you can do the rest of your planning.