When you are looking at your social security payments and when to take them it can get very confusing to say the least. Many people depend on their social security income to increase their financial stability later in life, for some people it is their only source of income, so clearly making the right decision on when to start taking your benefits is extremely important to most people.
The first thing you need to do when you begin planning your social security income is to use a social security calculator. This calculator lets you input your data and figure out how much money you will need to be receiving from social security to remain financially stable. You can find the social security calculator by going to a search engine and typing in "social security calculator".
If you start taking your social security benefit early then there is a penalty for doing so. Currently depending on how much before the normal retirement age you start then your benefits are reduced by less than one percent for each month you take benefits before the normal retirement age, up to a certain time limit. The rules to taking your social security benefits always seem to be changing, but as it currently stands if you take it early now you will be losing roughly 10% of your total benefit each year up until you reach normal retirement age. That is a big number, especially if you are depending on this income to cover most or all of your expenses for the rest of your life. This is why it is extremely important to use the social security calculator mentioned above and do your homework before you take your social security payments. If you need a certain amount and you come up short you may have a big problem on your hands.
If you can delay taking your social security benefit you can make out very well in the end as you will receive credit for waiting. Currently the credit is 8% per year over the normal retirement age. That number can add up quick, the government is more than happy to reward you if you are willing to delay taking your social security income from them for a few years. Many people are very happy to finally be able to retire, and having to continue working is not something that most people want to hear. However, if you can increase your benefits substantially by biting the bullet for another year or two it may be worth delaying in the long run.
This is one of the most important decisions in your life, so remember the earlier you take this payment the less you will get each month, and that is for the rest of your life. Conversely, if you can hold off and work a little little you can substantially increase your social security benefit for the duration of your life.
Everyone has a break even point with social security benefits where you will start to move ahead of the game depending on how early you took payment(you will get more checks but they will be for less money) or how long you were able to avoid taking your payments(you will receive fewer checks but they will be for a larger amount every month).
What you have saved from your working life plays a big part in when you take your social security benefit. What do you have in your 401K? What does your investment portfolio look like, are you seeing decent long term returns on the money you put in the stock market? These are questions that you need to have answered before you look at what necessity you have for social security payments. The longer you can avoid taking the payments the more the government will reward you with larger monthly payments. But again, everyone has a break even point where taking payments early, or taking payments later will work to their financial advantage long term. Doing the math on these payments and your other investments is not a fun task, but it is extremely important to make sure that you have enough money to continue the standard of living you currently enjoy once you decide to permanently quit working.
Keep in mind the amount listed on your social security statement is not what you are actually going to deposit into your bank account. There are taxes and medicare taken out of your payments, and this can have a big impact on your disposable income as well.
Your social security income is something that you want to make sure you get right, if you make a mistake in deciding when to take it you will pay for it for the rest of your life. A financial professional can help you more in depth with this decision and it is a good idea to seek professional advice if you do not have a crystal clear picture of what you should do regarding your social security benefit.
This article is not offering any investment or advise regarding social security payments or financial investments of any kind. Always consult a financial professional regarding any important financial or investment decisions.