Should You Collect Social Security As Soon As You Retire?

In this episode, James discusses one of the biggest questions about retirement: when should you collect Social Security?

There are many opinions about this topic which is why it’s important to understand Social Security and your personal financial situation to make a well-informed decision. James tells listeners six things to take into consideration to decide when to collect Social Security.

The six considerations are your income needs, whether or not you’ll work part-time during retirement, your risk tolerance, your taxes, your life expectancy, and, if you’re married, your spouse.

James guides listeners through each consideration and discusses topics like earning limits on Social Security, how Social Security is taxed, and what you can do to maximize your after-tax income. And, while no one can perfectly predict life expectancy, James also covers how your estimated life expectancy influences when you start collecting Social Security and how your children and spouse play into the decision. 

Key Points:

6 Considerations To Decide When To Collect Social Security:

1. What are your income needs?
   • Understand your other sources of income like pensions, investments, rental properties, or a spouse working
   • Look to maximize your total income throughout retirement, not just your immediate income
2. Are you going to work part-time during retirement?
   • There is an earnings limit on Social Security
   • Earnings limit is $18,240 before full retirement age and $48,600 at full retirement age
3. What is your risk tolerance?
   • Social Security increases every year that you defer collecting
   • If you have a low risk tolerance, you can maximize your guaranteed income increases by deferring Social Security
   • If you’re comfortable with investing, then the earlier you collect your benefit the less you have to pull out of your portfolio
4. Taxes
   • Social Security is taxed more favorably than IRA distributions
   • You want to maximize your after-tax income
   • If your only income is Social Security and Roth IRAs, you probably won’t pay any taxes
5. Life expectancy
   • If you think your life expectancy is not long, collect earlier
   • You can pass your IRA to your children or other heirs
   • If you think your life expectancy is long, you may want to delay Social Security and use other income sources or investments
6. Your spouse
   • Collecting Social Security should always be a two-person decision if you’re married
   • Spousal benefits and survivor benefits

Timestamps:

1:36 – Consideration #1: Your income needs and other income sources

3:25 – Consideration #2: Whether or not you will work part-time during retirement

6:34 – Consideration #3: Your risk tolerance

9:37 – Consideration #4: Your taxes

12:06 – Consideration #5: Your life expectancy

14:36 – Consideration #6: Your spouse

17:10 – Make your Social Security decision part of your financial plan