Should I Take Social Security at 62?

Years ago, there were lucrative Social Security claiming strategies, such as file & suspend and restrictive applications, which are not available anymore. Now, it is more difficult to know what strategy is best for you. In the past, standard thinking was that waiting as long as possible was best, since it would maximize your benefit. However, this doesn’t always take into account the taxes you’ll pay on your social security. 

Due to these tax implications, at REAP Financial, we’re seeing a growing trend of families who are better off taking their benefits earlier, in some cases as early as possible. To be clear, this is not necessarily because they need the benefit, but because taking it early allows them to get more benefit over time versus waiting to take it late. Keep reading to see if you might fall into this group of people who should be taking their benefit early!

Can You Take Social Security Early? 

Are you a candidate to take Social Security early? The majority of Americans do take Social Security early. However, most Americans do this because they simply need the income. In the absence of lucrative claiming strategies that existed in the past, most people default to trying to claim their benefits as late as possible, to get that 8% increase every year and cost of living adjustments until age 70 when you start claiming. In this case, your check may be bigger, but you may find that you don’t net more because they don’t take the tax lens into consideration. 

At REAP Financial, we always look at taxes, since it matters not just what you make, but what you keep. Whether we’re looking at investment returns, pensions, 401K distributions, and Social Security, considering the taxes matters a great deal. But how do you know if you’re a candidate to take Social Security early or whether you could benefit from waiting until you’re older, 67 or 70? Now, we’ll take a look at how REAP Financial identifies this for families, so they get the maximum amount of money from their Social Security benefits over time. 

The Common Pitfalls

There are a few common ways people fall into claiming Social Security late. First off, retiring early. people with considerable wealth tend to retire sooner. This is because they have often built a large nest egg, which gives them the security to retire without relying on Social Security. Secondly, many of our clients were high-earners, who are used to living a nice lifestyle. In most cases, these families want to maintain their lifestyle or even increase it as they head into retirement. For this reason, they try to maximize their Social Security benefit by waiting to claim it. With that said, your budget will have a big impact on whether or not you fall into this category. 

For example, if you retire in your early 60’s and are trying to maintain a high lifestyle, you may find yourself drawing on your portfolio a lot in early retirement. It can make sense to supplement that budget with Social Security income, as opposed to waiting. If you’re married, you’ll have more options here, as spouses can choose to start claiming their benefits at different times. 

Required Minimum Distributions

One more thing to consider is required minimum distributions. Once you hit 73 or 75, you’ll have to pull money from your IRAs and 401Ks through required minimum distributions. If you have accumulated a lot in these account types, your RMDs may be very significant, such as $60-150K or more per year. Typically, these numbers only go up as you get older and your account values go up.

For example, imagine a couple who retires early, defers Social Security in early retirement, and pulls from their portfolio instead. When they hit 70, they receive their maximized Social Security benefits. Three years later, they start having to take large required minimum distributions, which may cause them to jump a tax bracket or two. If you fall into that, you’re paying more of your Social Security benefit back in taxes in those later years. So although you’re receiving a higher amount, you’re actually netting less due to the ongoing tax payments. On the other hand, if you decide to take Social Security early and use that to supplement your income, it will allow you to take less out of your portfolio, giving your assets more time to grow. 

Of course, this is not a one-size-fits-all plan. Every family’s situation is going to be different. However, we’re seeing now that nearly 50% of families with $2 million or more accumulated should be taking Social Security early to get the most benefit over the long-term.

Hands-On Example: The Smiths 

Now, let’s look at a hands-on example: the Smiths. This is a couple making good income, $400,000 per year between the two of them. They both hope to retire at the end of 2024 at the age of 59. Their full Social Security benefit would be $3000 dollars each (for simplicity’s sake). They have substantial wealth built up in 401Ks, Roth IRAs, and a brokerage account, as well as cash on hand and a paid-off house, all valued at a net worth of $5.25 million. We’re putting them at a conservative 6% rate of return. 

They have a nice lifestyle they’d like to maintain, requiring roughly $15,000 a month. When they retire, they’re 59 with no income, Social Security benefit, or pension. They pull out of their portfolio to sustain their lifestyle, with a higher budget to account for inflation. Since they don’t turn on their Social Security benefits, they draw down on their accounts at the early stages of retirement. 

When they reach 67, they turn on their Social Security benefits and start receiving $3000 each a month. This helps cover their monthly budget, which continued to rise with inflation and is now at nearly $20,000 a month. Because of the Social Security benefit, they can draw less on their portfolio to cover their expenses. This couple manages to keep their draw rate so low they can make it to age 100 still with a sizable portfolio. Note, all of these numbers take into account their RMDs and taxes. 

Now, let’s say the situation is the same, but they decide to start claiming their Social Security benefits at age 70. Because they’re waiting until 70, they’ll each get $3,720 per month, roughly $700 more than before. In this case, they still draw out their portfolio a lot in the beginning of retirement, but they wait three more years to start collecting Social Security benefits versus the prior scenario. In this case, they cross the 1% withdrawal rate threshold sooner, but still make it to age 100 with a sizable portfolio. 

In our final scenario, they begin taking Social Security at 62 (PDF). Because they start claiming it early, they get a lower amount, about 30% lower at $2100 per person. Now, when they begin retirement, they only run down their portfolio without Social Security benefits for 3 years. Once they get their benefits, they can put them towards their budgeted needs and withdraw less from their portfolio. This allows their assets to remain in their portfolio longer, continuing to compound. 

In all three of these scenarios, the couple reaches 100 with plenty to live out late retirement and pass onto their heirs. But which one leaves the most to pass on? After taxes, required distributions, and more, which is best? In this case, taking their Social Security benefit early versus late nets them over $200,000 more in assets. As you can see, when you factor in the net numbers, there is no breakeven point, meaning if you live to see X age, it makes sense to wait to take Social Security benefits. Unless they expect to live to see 105, 110, or higher, they won’t approach a breakeven age, so it doesn’t make sense to wait to receive Social Security. 

So When Should You Take Social Security? 

Although our example was with a family with over $5 million in net worth, we see this hold true for families with $2 million and above all the time. It all boils down to what your tax bracket will be in retirement, what type of assets you have, your lifestyle, and your expected longevity is. If you don’t expect to live long, it could make sense to take it early. On the flip side, if you expect to live a long time, it could make sense to wait to take it. These are all things to consider when you’re planning your retirement.

If you’re in the midst of planning your retirement, check out our Social Security Decision Guide! This will help you get a better sense of how families are making educated decisions around when to claim their Social Security benefits to get the maximum benefits. To get a hold of this great resource, just send an email to and we’ll have it sent straight to your inbox!

Retirement Planning in Austin, Texas

If you’re in the Austin, Texas area and are looking for a retirement planner near you, speak with one of our expert retirement planners today. Our team at REAP Financial specializes in crafting personalized retirement strategies that align with your unique financial goals and lifestyle aspirations. Let us help you navigate the complexities of retirement planning and ensure a secure, comfortable future. Reach out to us for a consultation and take the first step towards a worry-free retirement in Austin.

Phone: (512) 249-7300

Main Office Address:

REAP Financial

9414 Anderson Mill Rd #100

Austin, TX 78729


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