About to Take Social Security? Read This First — The Motley Fool

Social Security gives crucial advantages for tens of millions of retirees. If you have paid into the system your total life, you are most likely keen to acquire your cash as early as you presumably can. But except you are coming into retirement with a wholesome nest egg, it most likely pays to wait so long as you possibly can to file for advantages, even when which means working longer within the interim.

How closely will you depend on Social Security?

There’s a motive so many seniors rely upon Social Security to pay the payments: They do not have a lot financial savings of their very own. In truth, the common family nearing retirement (aged 56 to 61) has simply $163,577 saved for it, in accordance to the Economic Policy Institute. Now, to be truthful, this knowledge is a number of years outdated, and it would not essentially communicate to different potential revenue streams. For instance, you may need a family with $163,000 and alter in an IRA, but when that very same household additionally has a enterprise it is planning to promote, that is a stable supply of retirement revenue proper there.

Pile of Social Security cards


The level right here, nonetheless, is not to exactly nail down how a lot financial savings the common older family has. Rather, it is to get you to consider how a lot financial savings you have, as a result of that can dictate when it is best to file for Social Security. In a nutshell, the much less cash you’ve of your personal, the extra it pays to maintain off on advantages.

Now, if you have a look at your nest egg stability, you may see a reasonably large quantity on that display screen or assertion. But let’s assume you’ve $500,000 socked away, which is about thrice the aforementioned common for older households. As a common rule, you possibly can count on to withdraw about 4% of your financial savings stability annually to keep away from depleting it prematurely. If you’ve $500,000 in financial savings, that’ll purchase you about $20,000 of revenue yearly. And if you have a look at it that manner, that is not a complete lot. Therefore, you will need to take steps to get as a lot cash as doable out of Social Security — and which means delaying advantages so long as you possibly can.

Social Security: It pays to maintain off

Your Social Security advantages themselves are calculated based mostly in your earnings file. Specifically, your high 35 working years are thought of when establishing your full month-to-month profit quantity. Then, when you attain your full retirement age, or FRA, as decided by the Social Security Administration, you will be entitled to acquire that full month-to-month profit. Your FRA is a operate of your 12 months of start, as follows:

Year of Birth

Full Retirement Age




66 and a pair of months


66 and four months


66 and 6 months


66 and eight months


66 and 10 months




That stated, you get an eight-year window to file for Social Security that begins at age 62 and ends at age 70. (Technically, you do not have to file at 70, however as you will see in a minute, there is not any motive to wait any longer.) If you declare advantages earlier than reaching FRA, these month-to-month funds can be diminished. But if you happen to maintain off previous FRA, you will get an eight% increase for annually you delay. This implies that if you happen to’re entitled to $1,500 a month at an FRA of 67, ready till 70 will improve every fee to $1,860 — for all times. Once you flip 70, nonetheless, you possibly can not proceed to accrue the delayed retirement credits that provide you with that increase, which is why that is typically thought of the most recent age to file.

Of course, when you have a large nest egg and do not want your Social Security advantages to pay the payments, however reasonably need the cash to get pleasure from extra journey and leisure, then you might not need to maintain off till 70. And frankly, there is not any motive to make your self wait if you happen to’re financially secure. But if you happen to’re relying on these advantages to cowl a big chunk of the payments, then it pays to wait so long as doable to acquire them. You may have to lengthen your profession a number of further years to enable for that choice, but it surely’s a much better guess than leaping the gun on Social Security and struggling for it later in life.

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