Should you take Social Security early?

As you’re looking ahead to retirement, you may be tempted to take your Social Security payments as early as age 62 (or earlier for survivor benefits). But that’s a decision that shouldn’t be taken lightly.

In some cases dipping in early can be a lifesaver — if you lose your job, for example, or you have little in the way of other resources. Or maybe your health takes a turn for the worse. But in the long run, most people are better off waiting until full retirement age (usually 66 for people born from 1943 to 1954) or longer to start receiving benefits.

The chart below shows why. Look at the difference in estimated monthly payments for a mid to top earner who has been making Social Security tax payments continually throughout his or her career.

Age Monthly Social Security check
62 $1,500
66 (full retirement age) $2,000
70 $2,640

Source: BlackRock and (2013)

Often people don’t take into account just how much money they risk losing over the long run if they take Social Security early and live beyond their life expectancy. And consider this: Each year your Social Security payment changes to align with cost-of-living adjustments (COLA) on a percentage basis. So if you take your payments early, those adjustments will be made on a smaller amount. As a result, over time, your COLA increases will add up to less money than if you had waited.

Finally, keep in mind your spouse is eligible to receive your monthly payment amount as a survivor benefit if you die (provided it is higher than his or her own amount). If you take your benefits early, you’re leaving a smaller payment for the remainder of your spouse’s life.

To learn more about how Social Security fits into your retirement income plan, and get additional insights to help you decide when you should start collecting benefits, talk to your Ameriprise financial advisor.

Ameriprise Financial and its representatives do not provide tax advice. Consult with your attorney or tax advisor regarding specific tax issues.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.