As individuals approach retirement, one critical decision they face is when to start claiming Social Security benefits. The age at which you choose to claim can significantly impact the amount you receive, and each option comes with its own set of positive and negative aspects. At Alaska Wealth Advisors, we understand that every individual’s financial situation is unique. We employ sophisticated software and personalized analysis to tailor a Social Security claiming strategy that aligns with your specific needs and goals.
Claiming at Age 62
Claiming Social Security benefits as early as age 62 is a common option for many retirees. The primary advantage of this strategy is the immediate access to a steady income stream. This can be particularly beneficial for those who may need financial support earlier in their retirement journey. However, it’s crucial to weigh the potential downsides.
Advantage:
- Immediate Cash Flow: Claiming at 62 provides an immediate income source, which can be advantageous for those who require financial support.
- Dependent Benefits: If you added a child to your family in your mid-forties or have a special needs dependent you may find that your benefits are supplemented by additional dependent payments.
- Potential Longer Benefit Period: While the monthly benefit is reduced, individuals who claim early may receive payments for a more extended period.
- Spending Comfort: Some clients will feel freer to spend money because of the assurance that stable social security income gives them while they are in their younger retirement years.
Disadvantage:
- Reduced Monthly Benefits: Claiming at 62 results in a lower monthly benefit compared to claiming at full retirement age (FRA) or delaying until age 70. If you live into your eighties, at some point, waiting for the larger benefit is better financially.
- Impact on Spousal Benefits: Claiming early may also affect spousal benefits, potentially reducing the overall household income.
- If you work and claim early Social Security, you could pay extra tax on your Social Security benefits if your earnings exceed a certain annual limit.
Claiming at Full Retirement Age (67)
Full Retirement Age (FRA) is the age at which individuals can claim Social Security benefits without any reduction in their monthly payments. Choosing to claim benefits at FRA offers a balance between early and delayed claiming.
Advantage:
- Full Monthly Benefits: Claiming at FRA allows individuals to receive their full, unreduced Social Security benefits.
- Spousal Benefits: When you claim benefits at FRA your spouse may be eligible for a spousal benefit that could be beneficial while they wait and allow their own benefit to grow.
- No Earnings Limit: Individuals can continue to work without the risk of their benefits being reduced due to income earned.
Disadvantage:
Delayed Potential: While claiming at FRA avoids reductions seen with early claiming, it also gives up the opportunity to receive an 8% annual benefit increase through age 70.
Delayed Claiming at Age 70
Delaying Social Security benefits until age 70 is a strategy that can maximize monthly payments for retirees who can afford to wait. This approach is particularly beneficial for those with longer life expectancies and other sources of income during their early retirement years.
Advantage:
- Maximum Monthly Benefits: Delaying until age 70 results in the highest possible monthly benefits, providing a substantial income stream throughout retirement.
- Increased Spousal Benefits: For married couples, delayed claiming can also lead to higher spousal benefits.
Disadvantage:
- Deferred Access to Income: Delaying benefits means forgoing several years of potential income, which may not be suitable for those who need immediate financial support.
- Unknown Lifespan: The decision to delay benefits assumes a longer life expectancy. If unexpected health issues arise, the financial advantages of delayed claiming may be diminished.
Selecting the right Social Security claiming strategy is a crucial aspect of retirement planning, and there is no one-size-fits-all solution. At Alaska Wealth Advisors, we recognize the uniqueness of each individual’s financial situation. By employing specialized software and conducting personalized analyses, we tailor Social Security claiming strategies to optimize benefits based on your specific needs, goals, and circumstances. Contact us today to embark on a comprehensive retirement planning journey that ensures you make the most informed decisions for a financially secure future.
Stan Moiseev
Associate Financial Advisor
Alaska Wealth Advisors, LLC is an investment adviser registered with the United Stated Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, which are available upon request.
The opinions expressed are those of Alaska Wealth Advisors Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.
 This material should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.
