Should You Take Social Security Early and Invest Your Benefits?

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Analysis of when to take Social Security to make the most of your benefits.

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  • In my situation, assuming a 4% return on my investment, if I take social security at age 63, and therefore will need to take less from my investments, MY breakeven point is at age 97+.
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Should You Take Social Security Early and Invest Your Benefits?

  1. 1. Should You Take Social Security Early and Invest Your Benefits?
  2. 2. The Basics of Your Social Security Benefits • At 62, your benefits are cut 25% compared to age 66. • At 70, you get 32% more benefits than at age 66. When you take your benefits matters:
  3. 3. The Impact of When You Take Social Security
  4. 4. 1 Way to Decide When to Take Social Security Standard “breakeven” analysis: • Compare total amount of money received over time if you start at ages 62, 66, or 70. • At some point, greater monthly amounts from starting later catch up with smaller amounts received earlier. • If you expect to live longer than breakeven, don’t take Social Security benefits until later.
  5. 5. Standard Breakeven Analysis 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 TotalBenefitsReceived Age Social Security Breakeven Analysis If Start Benefits at 62 If Start Benefits at 66 If Start Benefits at 70
  6. 6. Standard Breakeven Analysis Breakeven dates: • Comparing 62 to 66: 77 years old is the breakeven date. • Comparing 62 to 70: 80 years old is the breakeven date. • Comparing 66 to 70: 82 years old is the breakeven date.
  7. 7. But What If You Invest Your Benefits? Money taken early gets extra boost from investment returns. • Assume 5% average annual returns. • Should change breakeven date.
  8. 8. Breakeven Analysis With 5% Return 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 TotalBenefitsReceived+ReturnonInvestment Age Social Security Breakeven Analysis With 5% Return If Start Benefits at 62 If Start Benefits at 66 If Start Benefits at 70
  9. 9. Breakeven Analysis With 5% Return Breakeven dates: • Comparing 62 to 66: 86 years old is the mew breakeven date (nine years later). • Comparing 62 to 70: 90 years old is the breakeven date (10 years later). • Comparing 66 to 70: 92 years old is the breakeven date (10 years later).
  10. 10. When You Should Take Social Security Conclusions: • If you can invest Social Security benefits, taking them earlier makes more sense. • The higher the return, the more it pays to get benefits early. • For married couples: spousal benefits can make breakeven dates more complicated depending on your specific situation.
  11. 11. How to Get More Income During Retirement Social Security plays a key role in your financial security, but it’s not the only way to boost your retirement income. Our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family.

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