A big question that investors face as they approach retirement is when/how to take social security. Most investors are aware there is some type of penalty for taking early social security, but a lot of clients don’t know the exact reduction they’ll see by taking early benefits. Take a look at the chart below- it shows the penalty for taking early distributions as well as the “bonus” (or additional benefit) you can get by delaying benefits beyond your “full retirement age” (FRA).

As you can see, taking SS benefits at age 62 results in a 25% permanent reduction in your benefits…yikes! Although that seems like a stiff penalty, it still may make sense to take early benefits if you have reason to believe you have a shorter than average life expectancy (ie health conditions or family history). If you think you’ll beat the average life expectancy, then waiting for a larger check would be the way to go. Other factors should also influence your decision, so talk with your advisor before you make any permanent decisions!

Source: Amundi Pioneer Asset Management (Social Security Guide.2020)

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