Before you make your decision on Social Security (SSA), I want you to remember a three-word phrase. Every time I meet with a group to do an educational event I share a PowerPoint slide with these three words in bold capital letters:
“It really depends!”
There’s a variety of personal circumstances and family situations that you need to think about. The decision on when to take benefits is much more difficult than most people imagine. I urge you to look deeper and remember these three words:
It really depends!
Should my wife and I file at the same time?
It really depends!
Should I claim on my spouse’s benefit? My ex-spouse’s benefits?
It really depends!
I think you get my point. When I was writing this post, I did a quick Google search for articles on the topic of when to take SSA. To demonstrate the amount of information out there, I found several compelling articles.
There were articles with titles such as: “This Chart Shows Why You Shouldn’t Wait to Collect SSA”. The author made some excellent points. Right after that, I found one titled “3 Reasons to Wait Until 70 to Claim SSA Benefits”. That author also made some strong arguments. Which author is correct?
The answer is – it really depends!
Remember, the internet is designed to provide splashy headlines that get clicks and views. Words like “always”, “must”, and “need” create a sense of urgency and provide an air of authority. The advice might be factually correct but ultimately damaging if not applied correctly to the right people with the right circumstances.
There’s a lot of videos on TikTok and YouTube that give you a solid overview of SSA. I’m sure many of these people are competent and highly capable. However, none of these people know anything about your personal finances. Financial media is big business, and to play the game to get clicks and followers you better come across like you are an authority on anything and everything money-related.
The decision around Social Security simply cannot be made in a vacuum. It has to be part of a larger strategy around your assets, retirement income and family situation.
Consider the following scenarios. These are incredibly common and I hear these types of comments on a regular basis:
Your friend at work and his wife just claimed at 62, and says you should do the same. He’s been a good investor as far as you know, and you’ve even asked him for 401 advice.
What do you know about the rest of their financial situation? How much money do they have saved up in retirement accounts? Did you know that they received a large inheritance he never told you about? Is their house paid off? Are they permanently retiring from work? Do they know that there are income penalties if you earn over a certain amount before full retirement age?
Your sister claimed at 62 because she is afraid SSA is going to disappear in a few years and is convinced you better get what you can while you can.
Do you know what her monthly benefit is now versus what it would have been in the future? Is she now working again to make up the income gap? Do you know all the details about her financial situation? What happens if nothing changed with SSA and she should have waited?
You were watching a financial entertainer on social media, and they said everyone should wait until full retirement age and that it is stupid to claim SSA earlier.
Do they know anything about your personal circumstances? Did they mention other options and why there are compelling reasons why people claim before or after full retirement age? Did they mention that your current marital status and history may influence your decision? Are they aware that you have an adult child who is disabled? Are they an expert in SSA benefits, or are they talking in generalities about a program where the specifics really matter?
Your financial advisor said you should wait until 70 to collect in order to get the maximum benefits.
Did they show you actual numbers and explain how SSA fits into your retirement income strategy? What life expectancy are they using in their planning software (if they use it at all)? Are they crystal clear on all your personal goals in retirement? Is it possible that starting SSA prior to 70 would provide more income for your overall lifestyle in your active retirement years? Did they explain that waiting until 70 usually means that the breakeven point for that decision doesn’t occur until your early to mid-80s? Are they aware of your health expectancy or any medical conditions that might run in the family?
I am not trying to be insulting or overly skeptical of other peoples’ motives. I simply want to stress that listening to other people without getting all the details can be costly. Remember, for most Americans this is the most important retirement income decision they will make. I want you to get it right and not be afraid to ask questions or do additional research. Get a second opinion if you need to.
A final warning regarding Artificial Intelligence tools. ChatGPT, Co-Pilot and other AI tools can be helpful, but you need to really question their accuracy. I’ve entered certain scenarios into AI bots and the calculations come out flat wrong. It can be helpful to give you some general data and information, but don’t rely on the numbers since some of the assumptions are incorrect.
AI often misses out on some important details regarding very specific scenarios like Disabled Adult Child (DAC) benefits, Child in Care (CIC) benefits, and similar planning issues. AI continues to improve, and the systems are constantly “learning”, but unfortunately some of the information is still in the “garbage in, garbage out” phase. Assume it is garbage, especially if you are looking for detailed financial figures on a major life decision.