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What are the benefits of waiting until full retirement age if I can comfortably live off of Social Security benefits now?

My wife has been retired from the workforce for eight years and the two of us have approximately $750,000 in assets and no debt. Our combined Social Security benefits today would be more than adequate to sustain our current lifestyle. Is there any point in waiting an additional three years to retire at full retirement age if I can comfortably live off of Social Security benefits now?

Retirement, Social Security, Retirement Plans
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May 2018

Congratulations to you! You and your wife have done a fantastic job building wealth for your retirement. As you mentioned, you do not have any debt either, which means you can sustain your certain lifestyle. You can certain retire now and start receiving Social Security now or even later. I always remind clients that these are two decisions. First, when do I want to retire and second when do I want to start receiving Social Security. I don't know the exacts details of your situation: age, investment allocation, the breakdown of qualified assets vs non-qualified assets, access to healthcare, etc.

Claiming before Full Retirement Age (FRA), a benefit is reduced 5/9 of 1% of the Primary Insurance Amount (PIA)  for each month before Full Retirement Age (FRA) age up to 36 months. 

If the number exceeds 36 months, then the benefit is further reduced 5/12 of 1% of the Primary Insurance Amount (PIA) per month. 

Please note that Primary Insurance Amount (PIA) refers to the unreduced benefit that you are eligible to receive at Full Retirement Age (FRA).

There is an actuarial reduction for claiming Social Security benefits early.

Here are two examples

Donald retires and claims benefits 3 years early, so his monthly benefit would be reduced by 20%: 5/9 x 36 = 20%

By claiming benefits 3 years early, Donald permanently reduced his $1,200 Full Retirement Age (FRA) benefit to $960 at 63. 

Daisy retires and claims benefits 4 years early, so her benefit would be reduced by 25%: [5/9 x 36 = 20] + [5/12 x 12 = 5] = 25%

By claiming benefits 4 years early, Daisy permanently reduced her $1,500 Full Retirement (FRA) benefit to $1,125 at 62. 
Social Security is more than simply a monthly check, it's a valuable source of sustainable retirement income. It offers the following benefits:

  • Guaranteed lifetime income
  • Inflation-adjusted income
  • Survivor and spousal benefits
  • Preferential tax treatment

Every situation is unique. I encourage you to work with a professional who is well-versed in retirement income strategies. Good luck to you and your wife. 


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