Yahoo Finance I’m a Retirement Planner: 4 Best Reasons to Take Social Security Early
Financial planners often urge their clients to take their Social Security benefits as late as possible so they can maximize the amount they get monthly. However, there are times when taking Social Security earlier than full retirement age is beneficial.
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Raman Singh, a CFP and owner of Singh PWM, dubbed “your personalized CFO,” weighs in on why you’ll want to consider claiming your Social Security benefits early.
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You Don’t Have Enough Saved/Invested
The number one reason you might take Social Security early is financial need.
“Depending on the client’s assets versus their income need, sometimes it requires a financial planner to immediately turn on Social Security so that we can lower the total impact of portfolio withdrawals,” Singh said.
This grants retirees enough to live on without going broke during retirement.
You Can Collect Your Spouse’s Higher Benefits
The second reason to take Social Security early is if you are in a position to collect a higher amount of spousal benefits.
“Let’s say you have spousal benefits where you can collect either your full benefits or half your spousal benefits. In some cases, two spouses can maximize their benefits by delaying one spouse’s benefit for the long-term while that spouse collects half of the other spouse’s benefit.” Singh said.
This works when one spouse’s benefits are significantly higher than the other’s. Or, it’s a good idea when one spouse faces a significantly shorter lifespan due to illness.
While this is a touchy subject to address, Singh noted, it’s important to face reality if that is the case, and set up the longer-lived spouse financially.
You Want To Leave a Legacy to Heirs
Another reason to take Social Security early is a desire to leave funds behind to children or grandchildren, Singh said. He’s found this to be common in baby boomers.
“So when a client shows a priority of saying, ‘Hey, I want to leave money behind for my kids,’ then perhaps what we want to do is once again lower the portfolio withdrawals and we’ll be able to do that by supplementing Social Security.”
Your Health is Poor
No one knows how long they have to live, and may bank on living a longer life, deferring Social Security as long as possible. Yet Singh said, that considering your health should be a big factor when you take Social Security.
“So that’s always a slippery subject, but health is a big concern,” he said. “If a client says, I’ve been diagnosed with cancer or dementia, and I think I may pass away soon, or need more resources, then there’s a strong indication on why we should collect Social Security at that point.”
Be Aware Of Income’s Effect on Benefits
While it’s great to take Social Security early if it meets your financial needs, Singh warned that if you’re still earning other income, be aware of the limits on how much you can earn before your benefits are reduced even further.
“So don’t end up taking Social Security early if you’re working just for the sake of it.”
Be Aware of Divorce Benefits
Lastly, he urged people to be aware of divorce benefits in which you can collect your ex-spouse’s benefits.
In essence, if you’re 62 or older and were married to your former spouse for a minimum of a decade, you might be eligible to receive between one-third to one-half of your Social Security benefits.
“A lot of people tend to overlook these little things that could quantify them for Social Security benefits,” Singh said.
Seek a Flat Fee Planner
If you need advice on when to take Social Security, Singh recommends caution in the financial advisor you work with. Some require a longer-term financial commitment or take fees. Singh recommended a flat fee planner, like he is, where you pay an hourly fee and ask for an estimate of how many hours your planner will spend working with you.
While you should think carefully about taking Social Security early because it’s not an action you can undo, these and other reasons may be the best strategy for your retirement.
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This article originally appeared on GOBankingRates.com: I’m a Retirement Planner: 4 Best Reasons to Take Social Security Early
