When is the best time to start Social Security income?

Everyone who reaches retirement age needs to determine how to maximize their Social Security benefits. For those born between 1943 and 1954, full retirement age is 66. Anyone is free to start as early as age 62 in exchange for receiving about 30 percent less benefits for the rest of their life. Alternatively, you can wait until age 70 and receive about 32 percent more income every year for life.

So what’s the best way to maximize?

There are a lot of variables to consider. For one, if you lack other resources, you may not have the luxury of waiting. It may be necessary to start taking benefits early just to pay your bills.

Also, if you are in poor health, it may not make sense to delay because it can take many years to break even.

Should those in excellent health automatically delay their benefits? Let’s assume that you elect to wait until age 70 to collect a $30,000 annual benefit instead of receiving $20,000 per year had you started at age 64.

For the first six years you have collected $120,000 less benefits by waiting, but for the rest of your life you now get $10,000 more per year. If you live until age 82, you break even in nominal dollars and if you live until age 92, you would have collected $100,000 more by waiting.

However, there are other factors to consider. Did taking benefits early allow your other investments to grow undisturbed or did taking early benefits allow you to minimize taxes by reducing distributions from retirement accounts?

When trying to optimize Social Security benefits there isn’t a particular rule of thumb because there are too many factors that must be considered. An experienced financial adviser may be able to assist you in making a smart decision.