When should I apply for Social Security?

Without a doubt this is the questions I get asked most often when working with clients that are nearing retirement age. I also get asked this question by children of parents that are nearing retirement that are concerned that their parents have done little or no financial planning.

Gone are the days of retiring at 66 (the new 65) because “that is when one is supposed to retire”.

The answer as to when one should apply for Social Security is different for everyone and depends in large part upon your situation and your retirement plans.

If you are not working and have limited resources you may have no choice but to take Social Security early. If you are still working, whether you want to or not, it probably doesn’t make sense to apply for benefits early.

Generally, if you apply for Social Security at age 62 your benefit will equal 75% of your Primary Insurance Amount (PIA). If your PIA at 66 would have been $2,200 then your monthly benefit will be reduced to $1,650. If you live to the age of 90, the difference in the reduced monthly amount can add up to over $85,800 in lifetime benefits lost.

On the other hand, for each year you delay taking your benefits, up until age 70, your benefit will increase 8% per year, guaranteed. So if you wait until age 70, using our $2,200 PIA base, your monthly benefit will increase to $2,904 or an additional $72,000 lifetime benefits at the age of 90.

In both of these examples the monthly am ounts have not been adjusted for any cost of living adjustments (COLA) which can change the amount of your PIA.

There is no one size fits all answer. If you have questions about how social security will fit into your financial plans, please give me a call.