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What is the Best Age to Start Receiving Social Security Benefits?


A frequently posed question in financial planning circles is, "What's the best age to start receiving Social Security benefits?" The answer, like many elements in finance, isn't clear-cut. It varies from person to person, being heavily influenced by factors such as one's individual financial standing, marital status, and retirement plans. Although many advisors suggest waiting until closer to age 70, the decision requires an in-depth examination of all available options, careful planning, and perhaps professional guidance.

Understanding the Normal Retirement Age (NRA) and Deferred Benefits

Everyone has a designated Normal Retirement Age (NRA), which is essentially the benchmark age at which you're entitled to receive your 'full' Social Security benefits. The NRA, however, is not an absolute limit. You can choose to postpone your benefits beyond your NRA and receive an increased monthly payout—an additional 8% per year deferred until you turn 70.

Taking your benefits before reaching your NRA, conversely, comes with consequences. If you start receiving payments up to 36 months prior to your NRA, your benefit will be reduced by five-ninths of a percent for every early month. And if you start even earlier, beyond 36 months, an additional five-twelfths of a percent per month will be deducted. For example, for those born after 1960 with an NRA of 67, choosing to claim at 62 will lead to a 30% reduction in benefits.

Spousal Benefits and Coordinated Claiming

When it comes to married couples, the Social Security landscape becomes a bit more complex but also potentially advantageous. A common strategy is to have one spouse claim their full benefit early while the other spouse, in the interim, claims the spousal benefit. This allows the second spouse to defer their own benefit, perhaps up to the age of 70, leading to a higher payout when they finally claim.

The first spouse, having initially claimed, can subsequently opt for either their own benefit or the spousal benefit from the second spouse's claim, if the latter proves to be higher. This coordinated approach to claiming benefits can maximize the total benefits received by the couple, but it requires careful planning.

Strategic Decision-Making: Weighing All Assets

One of the key considerations when deciding when to start receiving Social Security benefits is to take into account all your assets. You should look at the entire picture, including potential future cash flow from all sources like pensions, savings, and investments.

Remember, you only get to start claiming Social Security benefits once. Therefore, it's crucial to strategize wisely, and ensure that the choice you make aligns with your individual or joint financial goals and retirement plans.

The 'best age' to start receiving Social Security benefits isn't universal. It hinges on individual circumstances, goals, and financial landscape. Make this important decision with careful planning, possibly with the assistance of a professional financial planner, to optimize your retirement income and secure your financial future.

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