One of the biggest decisions individuals nearing retirement age must make is determining the best time to begin receiving Social Security retirement benefits. While some may opt to start taking payments as early as possible, others choose to delay receiving benefits. The decision can be complex, as a variety of factors must be considered. In this blog post, we’ll take a closer look at when you should take your Social Security benefits.
How Can I Determine When I Should Take My Social Security?
Social Security retirement benefits can be claimed as early as age 62 but delaying until your “full retirement age” can result in you receiving a higher monthly payment. Full retirement age varies depending on your birth year, but it generally ranges from 66 to 67 years old for most individuals. If you delay receiving benefits until age 70, your monthly benefit will be even higher.
The decision about when to begin receiving Social Security retirement benefits involves several factors that should be considered carefully, including:
- Health and Longevity – One factor to consider when deciding when to begin taking Social Security benefits is your health and longevity. If you are in poor health or have a family history of health problems, starting your benefits earlier can help ensure you receive the maximum amount of money possible. However, if you are in good health and expect to live a long life, holding off on taking benefits may be a more suitable option.
- Income Needs – Another critical factor to weigh when determining when to begin receiving Social Security benefits is your income needs. If you’re in a good financial position and do not need the extra monthly income, waiting to receive benefits can result in higher monthly payments later. On the other hand, if you need the income to cover your expenses, it may be necessary to begin receiving benefits early.
- Marital Status – Married people must consider the impact the decision to start claiming Social Security benefits will have on them as a couple. Some strategies can maximize the total amount of money received by both spouses.
- Tax Implications – Lastly, the tax implications of receiving Social Security benefits must be considered. If you have other sources of income during retirement, such as a partner’s salary or investment income, the combined income may be subject to taxes. Depending on the amount of combined income you have, up to 85 percent of your Social Security benefits may be taxable.
Even after considering the factors above, individuals often are unsure about when to start receiving their social security benefits. One trusted way to determine when to take your social security is a net present value (NPV) calculation.
What Is a Net Present Value Calculation?
A net present value calculation basically determines the current value of a future stream of income. While there is no way to determine exactly how long an individual will live, reasonable estimates can be secured. Insurance companies have been calculating life expectancy for well over a century now. Essentially, an NPV is calculated using an analysis of the current age of an individual, the individual’s life expectancy, and some basic presumptions involving economics.
Cantafio & Song PLLC runs net present value calculations for clients. Our NPV calculations enable us to suggest an age at which our clients should claim their Social Security retirement benefits. Our team performs this service for a flat fee.
If you are interested in taking advantage of our NPV calculation services, we can discuss this matter with you at no charge to see whether it would make sense for you.
Give us a call at (888) 458-0991 or contact us online today to schedule a free initial consultation.