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  • Writer's pictureAndrew Cremé

When To Take Social Security

Updated: Apr 13, 2023

Deciding when to take Social Security is a serious decision because it will have a permanent impact on the benefit you will receive for the rest of your life. And because in 2017 the full retirement age began transitioning from 66 to 67 by adding two months each year for six years, this makes choosing the right time to take Social Security even more challenging.


A graph showing the difference in benefits by birth year and claim age.

For illustrative purposes only. The Social Security Amendments Act of 1983 increased FRA from 65 to 67 over a 40-year period. The first phase of transition increased FRA from 65 to 66 for individual turning 62 between 2000 and 2005. After an 11-year hiatus, the transition from 66 to 67 (2017-2022) will complete the move. This material should be regarded as educational information on Social Security and is not intended to provide specific advice. If you have questions regarding your particular situation, you should contact the Social Security Administration and/or your legal or tax professional. Source: Social Security Administration, J.P. Morgan Asset Management.


One way to consider approaching the decision is by using a decision tree.


Are you working?

If yes, you may want to delay claiming, particularly if you are under your full retirement age and subject to the earnings test. If no, continue.


Do you have other sources of income?

If no, consider claiming your benefit. If yes, continue.


Do you prefer receiving a smaller benefit earlier versus waiting for a larger benefit?

If yes, you may want to take your benefit, but understand what you may be leaving on the table at older ages - see maximizing Social Security benefits below. If no, continue.


Do you want to claim your benefit to preserve your investment portfolio?

If yes, evaluate which claiming age results in the highest lifetime benefit based on your expected rate of return and life expectancy - see Social Security benefit claiming considerations below. If no, continue.


Do you expect to live past age 77?

If no, consider taking your benefit as yearly as age 62. If yes, continue.


Do you expect to live past age 81?

If no, consider taking benefit at Full Retirement Age (FRA). If yes, consider waiting to age 70 to take your benefit.



F.A.Q.s

How do I maximize my Social Security benefit?

The more you make for a longer period of time while delaying taking your benefit is the general way to maximize your Social Security monthly benefit. Whether that Social Security benefit will be maximized over your lifetime will depend on just how long your actually live.

A graph showing maximized social security benefits

Source: Social Security Administration, J.P. Morgan Asset Management. *Couple assumes at least one lives to the specified age or beyond. Breakeven assumes the same individual, born in 1960, earns the maximum wage base each year ($147,000 in 2022), retires at the end of age 61 and claims at 62 & 1 month, 67 and 70, respectively. Benefits are assumed to increase each year based on the Social Security Administration 2021 OASDI Trustee's Report intermediate estimates (annual benefit increase of 2.4% in 2023 and thereafter). Monthly amounts with the cost of living adjustments (not shown on the chart) are: $3,776 at FRA and $5,027 at age 70. Exact breakeven ages are 76 & 9 months and 80 & 7 months.


Overall, there are a four general ways to increase your overall Social Security benefit:


1) Work 35 years while paying into the system

2) Earn at least the Social Security wage base

- $160,200 for 2023, $147,000 for 2022, and $142,800 for 2021

3) Delay benefits until age 70

4) Be cautious working part-time prior to retirement

- if you add more years paying into Social Security that are counted and that lower your overall life wage assumption, a benefit amount can be reduced in the future.



What are Social Security benefit claiming considerations?

Three primary considerations when it comes to claiming Social Security benefits are:

1) How long are you going to live?

2) Are their ways to further maximize your benefit before you take it?

3) How will your Social Security benefit integrate into your current or ex-spouses benefit?

4) How will your Social Security benefit be impacted by your pension?


When it comes to longevity and how long we are going to live, no one knows for certain, however we can use actuary data to make an educated guess. In recent years, the average life expectancy is between 84 and 82, but that number is an average. So half of the population will live longer than that, and the other half will live shorter than that.

A graph showing your average life expectancy

Source (chart): Social Security Administration, Period Life Table, 2019 (published in the 2022 OASDI Trustee Report); American Academy of Actuaries and Society of Actuaries, Actuaries Longevity Illustrator, http://www.longevityillustrator.org/ (assessed September 29, 2022), J.P. Morgan Asset Management. Source text: Social Security Administration 2022 OASDI Trustees Report.


In reviewing the Social Security actual life table found here, it shows that when you make it to age 83, there's still less than a 9% chance of passing away in that given year, and the life expectancy of an 83 year old is between 90 and 92. A prudent thing would be to overestimate the age and choose a later date, so that you don't accidentally find yourself older than expected and short on money.


Is it better to collect Social Security at 66 or 70?

It depends on your specific situation. If you wait until you are 70 years old, you most likely will receive a higher benefit than if you take it at 66; however, you will need to have other sources of income to live on during the years in-between.


Is it better to take Social Security at 62 or 70?

This also depends on your specific situation. Just like above, if you wait until you are 70 years old, you most likely will receive the highest monthly Social Security benefit; however, you will need to have other sources of income to live on during the years in-between. Additional considerations to be made are that Social Security benefits can be subject to a phase-out if you make too much money during the years prior to your full retirement age (FRA).


Do I pay federal taxes on Social Security?

Social Security benefits can be up to 85% taxable to the recipient. The exact amount depends on your modified adjusted gross income (MAGI). If you file your income taxes as a single individual and your MAGI is above $34,000, the full amount of Social Security is taxable. If you file your income taxes as a joint married couple and your MAGI is above $44,000, the full amount of Social Security is taxable. If your MAGI is under those limits, your Social Security may be 50% taxable or even 0% taxable.


At what age is Social Security no longer taxed?

Social Security income is always subject to income tax as long as you are receiving it. Each year the amount of tax you pay on your Social Security benefit is determined by your modified adjusted gross income on your federal tax return.


When must you start taking Social Security?

You never "have" to start taking Social Security, but the benefit will not increase after age 70 so it would benefit you to not wait and to take Social Security by age 70.


How do they calculate Social Security income?

Social Security income is based on your working history and paying into the Social Security system. The Social Security administration takes 40 years of your working history and then will remove the lowest 5 years from the calculation. The more you have paid into the system, the greater the benefit received in general, but it isn't a linear formula. If you made $60,000 each year over your lifetime, your benefit would be higher, but not double that of someone who made $30,000 their whole lifetime. The exact amount is calculated by using something called the "primary insurance amount" (PIA).

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