When do I take Social Security?

[SeanK1956]

Hi,

I just retired, and my wife and I are contemplating taking Social Security this year.  However, I was paid by my previous employer through the end of this month, and we took an RMD from one of our retirement accounts earlier this year.  I want to know what my tax liability will be for next April, so that we can decide if we should take Social Security now or wait until early next year.  Thanks. 

[K M W]

There are a lot of factors to consider the best time to start drawing on Social Security.  You can take Social Security as early as 62,  but waiting to take it (waiting for any amount of time, up to age 70) will increase your monthly benefit. 

As this is a transition year for you, you will probably need to do some calculations to determine the tax impact of taking Social Security now, versus waiting until next year. Social Security benefits can be 0-85% taxable on your Federal tax return - depending on the amount of your social security income and the amount of all your other income. So if your salary and the RMD  received in 2024 is significant, than you may be paying taxes on up to 85% of any Social Security benefits received.  

There can be further consequences of taking Social Security this year, if you are not of full retirement age and earned income from your job this year - working and receiving benefits at the same time can create a reduction in the social security benefits you are eligible to receive (your question did not state your age, so I am not sure whether you are considered at full retirement age right now or not).  

I would recommend contacting the Social Security Agency and setting up an appointment to discuss your options - they will be able to tell  you what your benefits would be if you started claiming now, versus what the benefits are projected to be if you defer until next year or later.

As for the tax implications, it's difficult to say without knowing the rest of your information.  As a worse case scenario, you can plan on 85% of your Social Security benefits to be taxable - but that is the worse case - the amount taxable could be lower than that amount, even being fully NOT taxable, all dependent on the Social Security and all other  income received during the year.

[SeanK1956]

Thanks.  I'm 68, and my wife is 69.  I was told that if you plan to live until 85, age 67 is the best time to file for social security.  Also, I called the SSA 800 number, and the woman told me that the only time I should meet with Social Security people is when I am ready to claim our benefits.  When I asked to set up a meeting to learn about my options, she told me that I was misinformed.  Our financial advisor and others I know told me that SSA offers this when people are exploring options to when to take Social Security.  What have you heard?

[K M W]

There are a fair amount of "breakeven' calculators out there, where you can enter in how long you expect to live and it will calculate the optimum age to start receiving benefits.  Your financial advisor should have projection calculators that will do the same thing - based on the life expectancy assumptions they should be able to determine, financially, the best time to begin benefits.

I have also heard that Social Security offices will not give "advice" - but they can run the projections and give you valuable information on how much your benefit will be based on taking now, waiting until next year, waiting another year, etc.

In any case, your benefits would increase by 8% for each full year you delay receiving Social Security from your full retirement age until age 70, so at the most you and your spouse will want to start receiving benefits at that age, as there is no benefit in waiting longer than age 70.