Should I Take My Social Security at 62?

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Delaying Social Security to age 65 or later could end up costing you more money in taxes than it provides in bigger checks.

Behind every retirement plan built around Social Security lies the question of taxes. In their recent article, “Why Wealthy People May Want to Take Social Security at 62,” Kiplinger provides more detail on why waiting for Social Security to grow doesn’t always make sense, especially not for wealthier individuals.

More and more couples are better off filing at age 62 and using the income from Social Security to work on their investments, savings, and retirement accounts.  

Consider the example from Kiplinger:

A wealthy older couple is considering their options when the husband retires at age 62. When he does so, the couple’s income will drop off, and their tax bracket will accordingly drop to 10%. If the couple pulls from their 401(k) and IRA accounts to support themselves while they wait for Social Security to accrue for three or more years, the monthly distribution rate from their accounts would immediately put them into a higher tax bracket, about 22% at the time of the article (2018).

If the couple files for Social Security at 62, then they will receive smaller checks, but their tax bracket will remain at the low 10% level and they can use the Social Security income to meet their monthly budget. They can then take that time to compound more growth on their other assets (including their 401(k) and IRA). In the meantime, the amount of tax paid on the Social Security benefits would be minimal.

This is a quick example, but it serves to illustrate how the complexity of Social Security and retirement planning may run counter to conventional wisdom. An estate planning attorney can help you fit your plan to your circumstances, rather than squeezing your circumstances into a one-size-fits-all plan.

Reference: https://www.kiplinger.com/article/retirement/t051-c032-s014-rich-people-may-want-to-take-social-security-at-62.html