When Should I Collect My Social Security?

When is the right time to start collecting Social Security? Should I take it at 62? Wait until I’m old enough to get full benefits? Push it off to 70? As with most things financial, there’s no definitively correct answer. One retiree may need to collect at 62 to make ends meet, while another may be able to afford waiting until 70 to get the highest benefit. I tend to like the starting early option, whether you need the money or not. When we die, Social Security ends. For example, Bob takes his benefit beginning at age 62, and his twin brother Tom waits until age 70 to collect. Unfortunately, Bob and Tom suffer an untimely, cake-related death on their 70th birthday. Bob has received 96 payments from Social Security. Tom has received none.

But what happens if we live longer than 70 years? What do the numbers say? Let’s assume my Social Security Retirement Age is exactly 66. If I start collecting at age 62, I’ll receive about 25% less than my full benefit.  If I wait until age 70, I will receive about 32% more. For simplicity, we’ll say $1,000 per month is my full benefit, $750 is my age 62 benefit, and $1,320 is my age 70 benefit. It’s a big difference, isn’t it?

Maybe, maybe not.

If I take the benefit at age 62 and invest that $750 per month until I turn 66, even at 3% growth I’ll have enough accumulated to take $250 per month for another sixteen years. Add that to my $750 per month from Social Security, and I’ve got my $1,000 benefit until age 82. And if I die before age 82, there’s some cash left for my family.

I plan to keep working, so I won’t be eligible to collect Social Security early. So let’s say I start collecting $1,000 at 66 and invest it each month until I turn 70. I’ll have enough accumulated to make up the $320 difference each month for the next seventeen years. Waiting to age 70 to start collecting means I wouldn’t catch up until age 87.

That’s a long time to wait just to break even.