Three Reasons To Take Social Security Early

Summary

The transcript summarizes a podcast hosted by Ralph Estep Jr., a seasoned accountant, providing advice on when to take Social Security benefits early. He outlines three main reasons to take benefits early - financial need, health concerns, and maximizing survivor benefits. Ralph also discusses important considerations like reduced monthly payments, tax implications, and lost benefits if returning to work. Key takeaways include assessing personal situations, understanding tradeoffs between taking benefits earlier or later, and consulting experts for guidance.

Chapters

Introducing Podcast and Host

Ralph Eastep Jr. welcomes listeners to the Ask Ralph financial advice podcast brought by Saajjo Accounting. He previews discussing when to take Social Security benefits early.

Reason 1: Financial Need

Taking benefits early provides income for those facing financial challenges or unexpected expenses in early retirement years.

Reason 2: Health Concerns

If having health issues or shorter life expectancy, makes sense to take benefits earlier rather than risk missing out.

Reason 3: Survivor Benefits

Taking benefits early maximizes total amount for spouse if passing away earlier than expected.

Considerations for Taking Benefits Early

Drawbacks include reduced monthly payments, tax implications, and lost benefits if exceeding income limits after returning to work.

Advantages of Delaying Benefits

Waiting to take benefits later increases payments with credits, allows tax planning, and boosts spousal/survivor benefits.

Action Items

1. Consult a financial planner to assess my personal health, family history and income needs regarding when to take Social Security benefits.
2. Discuss with my spouse the impact on our retirement income of optimizing early versus delayed Social Security benefits.
3. Research the income limits on working while collecting Social Security benefits if I return to the workforce.

Welcome to the Ask Ralph podcast. We're listening to an experienced financial professional can help you make sense of confusing questions current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting, as Ralph makes the complex simple by sharing his real -world knowledge with all things financial.

Now here's your host, Ralph Estep Jr. Hey, welcome back to another episode of the Ask Ralph show. I'm your host, Ralph Estep Jr. And today we have an important topic that many of our listeners may be facing, social security.

Specifically, we'll be discussing three reasons to take social security early. This episode is brought to you by Saggio accounting, your trusted partner in financial management. Ask Ralph will be right back.

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and you can get it either on paperback or on Kindle. So check it out when you get a chance. And now back to the podcast. So today we're gonna talk about Social Security and I'm telling you folks, this is a question that I get routinely in my practice.

And that is the question of, what would be some reasons to take my Social Security early? So if you're interested in this topic or you know somebody that might be interested in this topic in addition to you, please feel free to share this podcast with them, leave a review and just let them know about the Ask Ralph podcast.

So when it comes to taking Social Security, there's often a lot of debate about when it's right time to start taking benefits. While waiting until full retirement age or even beyond can have its advantages, there are some valid reasons why someone might choose to take Social Security early.

Let's discuss by starting three reasons why taking Social Security early might make sense for some individuals. Now, before we get started, let me explain. So each person based on your year of birth is assigned a, what they call full retirement age.

That full retirement age gets you 100% of your benefits. If you decide to take your Social Security benefits before then, let's say like age 62, then you'll get fewer benefits. Or if you decide to wait till age 70, you would get more benefits.

So let's talk about three reasons why you might make the option or make the decision to take it early. And number one is financial need. The first reason is clearly financial need. For some people who are facing financial challenges or unexpected expenses in their early retirement years, taking Social Security early can provide a much needed source of income.

So that's number one reason. Number two reason is health concerns. Another reason is health concerns. If you have health issues or anticipate a shorter life expectancy due to family history or other factors, it may make sense to start receiving benefits earlier rather than waiting and potentially missing out on enjoying those funds during your retirement years.

I say to clients all the time, if I had a crystal ball and could tell you when you were going to pass away, not forbid, then it would be a much easier decision to make. But maybe there is some family history or maybe you have an illness, a terminal illness.

And number three, survivor benefits. Lastly, survivor benefits play a significant role in the decision making process for some individuals. By starting Social Security early and receiving benefits sooner rather than later, you may maximize the total amount received over your lifetime if you pass away earlier than expected.

So all that said, now let's talk about some important considerations potential drawbacks. of taking Social Security. Like I said, if you take it before your retirement, full retirement age, there's an economic impact.

And what are those impacts? Number one, reduced monthly payments. Taking Social Security before reaching full retirement age will result in reduced monthly payments compared to waiting until full retirement age or beyond.

Basically, here's the rule of thumb. You will get 100% of the benefits at your full retirement age. You will get 25% less benefits if you take it at 62 and potentially 25% more benefits if you wait till age 70.

Number two, tax impact. It's essential to understand the tax implications of receiving Social Security benefits. Depending on on your overall income and filing status, a portion of your benefits may be subject to federal income tax.

You know, this is a little bit complicated, but basically, you know, you could end up paying tax on 85% of the benefits you collect depending upon your other sources of income. So you wanna meet with somebody like myself or a licensed tax preparer to go over this with you or a financial planner, that would be good too.

And number three, loss of benefits if returning to work. And this one a lot of people don't know about. If you choose to take Social Security early and then decide to return to the workforce, there are earning limits that could result in a reduction or temporary suspension of your benefits.

What am I talking about here? Well, let's say you decided age 62 that you're gonna take your Social Security benefits. And at that point, you're not working, but you start to realize that you really need a job.

Now, maybe it's not a financial need, maybe it's a psychological need. You know, you thought retirement would be fantastic, but it's not what you bargained for. Or maybe it's a financial need. Well, here's a deal.

So once you lock into your Social Security benefits, you have an amount that you can earn per year before they start taking away your benefits. So that's something to really consider. And again, talk to a professional about this before you make this determination.

Now, on the other hand, waiting until full retirement age or even beyond can have some advantages as well. And I kind of talked about those a little bit, but let's talk about what those are. And obviously, if we said you're gonna have reduced monthly payments taken at early, well, if you wait till the later date, you're gonna have increased monthly payments.

By delaying Social Security, you can potentially receive higher monthly payments as you'll be eligible for delayed retirement credits. You know, basically, like I said, if you wait till age 70, you may get as much as 25% more in benefits.

So the second thing, tax planning opportunities. Waiting until full retirement age or beyond may allow you to strategically plan your income sources and minimize the impact. of taxes on your Social Security benefits.

If you're waiting till full retirement age, you know, excuse me, even beyond full retirement age, then you may not have the same level or stream of income. So you'll be below those thresholds of where you'll have to pay tax on those benefits.

And thirdly, if you wait to delay them, spousal and survivor benefits. Delaying Social Security can also maximize spousal and survivor benefits for married couples, providing greater financial security in later years.

I see this a lot with clients who have a difference in age between husband and wife. Again, you need to meet with somebody and talk about your particular situation. You know, it's important to note that everyone's situation is unique when it comes to deciding when to take Social Security.

Factors such as health, financial needs, family history and personal preferences all play a role in this decision -making process. If you're unsure about what is best for your specific circumstances, I'm sure you'll be able to make a decision.

I highly recommend consulting with professionals like Saggio Accounting who can provide personalized advice tailored to your needs. What that wraps up today's episode of Ask Ralph. I hope this discussion shed some light on the reasons why someone might choose to take so security early as well as considerations for waiting until full retirement age or beyond.

As always, if you have any questions or topics you'd like me to cover in the future, please feel free to reach out. You can send me an email at Ralph at askralph.com. And like I've said before, you can sign up for our podcast through your place where you listen to them like on Apple or Spotify.

I also encourage you to share the podcast with others as we try to grow our audience. So until next time, stay financially savvy. Remember, this podcast is brought to you by Saggio Accounting, providing comprehensive financial management solutions for individuals and businesses alike.

Thank you for joining us on the Ask Ralph podcast. And with a simple click to subscribe, we'll invite you back to our next episode. And remember, financial issues don't have to be complicated. Just Ask Ralph.

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