Retirement & Financial Planning Report

It does not always make sense to draw at 62 but there are some common situations when it does. Image: larry1235/

As federal employees you have 3 main income sources in retirement: TSP, your FERS pension, and Social Security.

And your Social Security payments can either be a lot or little depending on how you start your benefits.

In my opinion, choosing when you will start Social Security is one of the biggest financial decisions you make in retirement.

So, we want to get it right!

While there is no “best” time age to draw benefits that works for everyone here are some of the biggest reasons to start benefits ASAP (often age 62).

Note: It does not always make sense to draw at 62 but this article’s focus are the most common situations when it does.

1. Health Problems?

If you have any severe health issues that affect your life expectancy, taking Social Security as early as possible can be a good idea. Your Social Security benefits stop paying when you pass* – therefore, if you die before you start collecting, you will completely miss out on any Social Security payments.

*Your benefit may pass to your spouse/kids in some situations. These benefits are called survivor benefits for spouses and family benefits for kids. But if you are single without kids then you do not have to worry about those.

2. Give Me the Money!

Another reason to collect Social Security at age 62 is if you need the extra income right now.

It would be nice if all of us had the financial resources to not rely on Social Security but real life is never that simple.

Many people simple can’t afford to take Social Security at a different age because the need the income now.

3. Take it Now and Invest It

Many people suggest taking Social Security right away even if you do not need the money and investing it.

On paper, this often looks really good. If you delay Social Security, they will increase your benefits between 5%-8% depending on your age and the stock market has grown about 10%/year on average for the last 100 years.

So if you take your benefits, earn 10% in the market then you are coming out ahead compared to the 5%-8% they would have given you.

But I would be wary before implementing this strategy in the real world for 2 reasons.

Number 1, the stock market has average 10%/year but that does not mean that will happen every year. Some years are great and some years are terrible. A maybe 10% is not always better than a guaranteed 5%-8%.

Number 2, in real life people often spend whatever money they get. It takes discipline to start Social Security and not spend it. Most people would probably struggle to consistently put the money aside and invest it in high quality investments.

4. Who Do You Leave Behind?

If you are married or have dependent children then your benefits do not just affect you.

In the event of your death, a surviving minor, spouse, or disabled child may receive Social Security money based on the amount of your benefits. Depending on the age of your surviving spouse, they could receive between 71% and 100% of your benefit amount. If you have a disabled child, they can receive a piece of your benefits as well.

Simply put: What they receive after you die is often based on what your benefits were while you were living. If you delay your benefits then your benefit will be bigger which then increases what they will receive after you.

So, if you have people relying on your benefits then there tends to be more reasons to delay your benefits.

Conversely, if you are not married and have no dependent children then there may not be any reason to delay your benefits past 62.

5. But I Made Less Money

If you are married but made significantly less than your partner then taking Social Security at 62 may make the most sense for you. This is the case for two main reasons.

Number 1, your spouse (the higher earner) will get more bang for their buck when they delay their benefits simply because their benefits started out bigger. So, if one of you is going to delay then it often should be the higher earner not the lower earner.

Number 2, as the lower earner you may be eligible for spousal benefits. This benefit is based on your spouse’s (the higher earner’s) benefit amount but you can only receive if you have already started your own benefits.

Final Thoughts

Social Security is a massive program with lots of rules and exceptions.

But in efforts to simplify things these 5 situations above are the most common times when it does make sense to take benefits right away.

It is up to all of us to do research until you feel comfortable that your choice makes sense for you.

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.

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