Should I take Social Security early to let my investments grow?


Q. I’m 62 and planning to retire next year. I will be living on my investments until I take Social Security. I’m trying to decide if I should start Social Security early so I can let my portfolio grow or if I should wait longer. I’m pretty healthy but both of my parents died in their late 50s, so I keep that in mind. Thoughts?
— Investor

A. Choosing when to take Social Security payments is a very personal decision.

So much depends on your overall financial situation. And of course, the current stock market drop is something to watch, especially if you’re close to retirement.

The idea of claiming Social Security earlier to allow for your investment portfolio to continue to grow could make sense in certain situations, said Brian Schiess, a certified financial planner with Modera Wealth Management in Westwood.

“One situation may be to protect against sequence of returns risk, in other words, being forced to start withdrawing from your portfolio during a suppressed market,” Schiess said. “Withdrawing from a portfolio balance that is already deflated may limit the portfolio’s ability to recover when the market rebounds.”

Based on the reduction in Social Security benefits that you would receive by claiming earlier, the investment portfolio may have a significant rate of return hurdle to make up that difference, he said.

If you decide to claim Social Security before age 70 or Full Retirement Age (FRA), you should be mindful of just how much benefit you are giving up.
Your base Social Security retirement benefit or Primary Insurance Amount (PIA) represents how much you would receive at your FRA, which is currently between ages 66 and 67, depending on your year of birth, he said. For example, the FRA for someone born in 1956 is 66 and four months.

“Generally, the earliest that someone can claim Social Security benefits is age 62. However, if someone decides to claim their benefit before their FRA, their PIA is reduced by a certain percentage for each month before their FRA,” Schiess said. “A person’s PIA can be reduced by as much as 30% if, for example, their FRA is 67 and they begin claiming retirement benefits at age 62.”

On the other hand, he said, the PIA will increase for every month that one delays claiming their retirement benefit beyond their FRA up to age 70. This concept is referred to as delayed retirement credit and may result in an increase of benefits of approximately 8% per year for every year of delayed claiming between FRA and age 70, he said.

That’s a pretty good rate of return, especially given the current volatility of the stock market.

Schiess called Social Security benefits attractive because they are one of the only sources of fixed income streams that are indexed for inflation.

“Social Security benefits are eligible for an annual increase known as a Cost of Living Adjustment (COLA), which is based on the previous year’s inflation rate,” he said. “To provide some perspective, the 2021 COLA was 5.9% while the 2020 and 2019 COLAs were 1.3% and 1.6%, respectively.”

He called Social Security benefits and their COLAs “a powerful tool to protect against the risks of outliving your assets and inflation.”

For this reason, it is often beneficial to maximize the amount of your Social Security benefit, he said.

You also should take into account the number of years that you actually receive benefits during your lifetime.

Of course, no one knows exactly when they are going to die.

“For this reason, health and family longevity history are significant considerations in the Social Security claiming decision,” he said. “If someone is diagnosed with a fatal illness and has a short life expectancy, are generally unhealthy, or do not have a history of longevity in their family, those are factors that may lead one to claim their Social Security benefits sooner than later.”

Consider working with a financial advisor who can help you consider your estimated benefits and what you should expect from your portfolio.

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This story was originally published on June 20, 2022. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.