Considering taking Social Security at 62? Answer these questions first

Q: I’m going to retire next year when I celebrate my 62nd birthday. I’m not sure how I’ll be drawing income, so I’m considering taking my Social Security benefit as soon as I’m eligible. Any risk with that?

A: It depends. Claiming Social Security is a very personal decision. How is your health? What is your marital status? Do you have any life expectancy issues? What are your other assets? Are you a conservative investor?

We often suggest that married couples coordinate the Social Security claiming strategy with their spouse. Whoever has the larger benefit may want to delay claiming until age 70 to create the largest survivor benefit for the remaining spouse.

If your health is questionable and you aren’t sure you’ll reach the breakeven age of 80, consider taking your benefit as early as you are eligible (usually 62). If you do this, factor in a benefit reduction of as much as 30%.

On the other hand, if longevity runs in your family, and you’re eating kale and getting enough sleep, consider postponing claiming your benefit and watch it increase by 8% per year, plus inflation, from your full retirement age (FRA) to age 70.

If you’re married to a higher-wage earner who has health issues and eats a lot of bad stuff, know that you’ll be able to collect their benefit upon their departure.

Do you have certificates of deposit (CDs) or are you a successful investor? Historically CDs have not kept up with inflation, so pulling income from cash equivalents allows your Social Security benefit to increase with inflation. A case can be made for laddering CDs that mature and provide a steady source of income.

Eligibility of Social Security benefits is usually age 62 as long as you have 40 or more credits earned. Your credits are based on income, and you can earn up to four credits each year. In 2023, the amount needed to earn one credit is $1,640. You can work all year to earn four credits ($6,560), or you can earn enough for all four in a much shorter length of time.

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Social Security calculates your benefit amount using your average indexed monthly earnings from your highest 35 years of earnings. If your work history is less than 35 years, zeros will be added for any “missing” years. Higher income produces a higher benefit amount. The full minimum primary insurance amount (with at least 30 years of work) is $1,033.50 per month. Years without earnings may reduce this amount. For 2023, the maximum monthly benefit Social Security will pay is $4,555.

Review your Social Security benefit statement and earnings history to make sure that wages by year are correct. Understand the assumptions made when calculating the estimated benefit. All estimates are shown in current dollars (actual benefit at stated age will be inflated based on wage-growth assumptions during interim years).

The most recent year’s earnings through retirement until FRA are based on earnings from two years ago; if the last two years’ earnings were $0, the assumed future earnings will be the same.

Survivor benefits are available to a widow(er) based on the deceased spouse’s earnings history and may be as much as 100% depending on the surviving spouse’s age.

A spousal benefit may be as much as half of the spouse’s primary insurance amount if claimed at FRA or later. A marriage must be at least one year, and the spouse must be at least 62 (for a reduced benefit until they reach FRA).

Divorced-spousal benefits are based on the number of years married and the ex-spouse’s earnings history. The ex-spouse’s benefit isn’t affected by a spousal benefit, nor are there notifications of the payments that are based on the work record. Documents are needed (marriage license, divorce decree, etc.) for proof.

Online access to your benefit statement and other tools are provided by Social Security and can found at https://www.ssa.gov/. Check with Social Security before filing for benefits.

There are many factors that play into Social Security claiming strategies, and you should not overlook income tax. Your tax advisor and financial advisor may be able to add value when you make this important decision.

Mary Baldwin, CFP®, is a fee-only financial planner at Buckingham Strategic Wealth in Indian Harbour Beach. Contact her at 321-428-4555 or mbaldwin@buckinghamgroup.com.

For informational and educational purposes only. Individuals should speak with a qualified financial professional based on their own circumstances to determine if the above is appropriate. The opinions expressed by featured authors are their own and may not accurately reflect those of Buckingham Strategic Wealth®

This article originally appeared on Florida Today: Ready to claim Social Security benefits? Answer a few questions first