For instance, say your savings won't cover ongoing expenses and you need to rely on social security income to make ends meet. In that case, deferring social security benefits may not be an option for you.
But if your financial circumstances offer more financial flexibility, deferring your benefits can be an advantage. For each year you delay (up to age 70), the payouts increase. In addition, if you plan to earn significant income between age 62 and your normal retirement age (65-67, depending on the year you were born), putting off your social security benefits may make sense. That's because any benefits in excess of specified limits ($15,720 in 2015) will be reduced. You'll lose $1 of benefits for every $2 in earnings above the limits. Note that you won't lose any social security benefits (regardless of earnings) once you reach full retirement age.
On the other hand, let's say you've accumulated a healthy balance in your 401(k) and expect that account to generate a good annual return. Under this scenario, you might be better off leaving your retirement savings alone and taking your social security benefits early to cover living expenses.
Or perhaps your family has a history of health problems. Taking social security benefits at age 62 might be a good choice.
For help with this important decision, please give us a call.