Social Security
When safe and possible, pay in cash. Sharon McCutcheon on Unsplash

For anyone in their 60s thinking about retiring, a difficult decision they face is when to take Social Security.

It is a complex question full of disagreement on the internet and at the water cooler at work. If you Google the question, several articles pop up: 10 reasons to claim Social Security early; or three reasons to wait until 70. They all contain conflicting points and perspectives.

As a certified financial planner, I see many different situations. I learned the best age to take Social Security depends on your unique situation.

So how do you figure out this age-old question?

Here are a series of steps to think through to determine the best age to take Social Security.

How is your health? If you are married, how is your spouse’s health?

Most people don’t want to think about how long they might live. If you have several health issues and consider yourself lucky to be here, it might be beneficial for you or your spouse to take Social Security as soon as possible.

Do you have high-interest debts?

Social Security grows at roughly 8% a year for each year you delay until age 70. If you have a five-digit credit card balance and you are paying double-digit interest rates, you might consider taking Social Security to help pay off the debt.

Are you still working? Are you younger than your full retirement age for Social Security?

If you were born between 1943 and 1954 your full retirement age is 66. Will you earn more than $19,560 in 2022? If so, then you might want to hold off on collecting. If you earn more than $19,560, your benefit is reduced by $1 for every $2 you earn over the income limit. Consider the example of $40,000 in earnings with the $19,560 earnings limit. This leaves you $20,440 over the limit. Subtracting $1 for every $2 out of $20,440 leaves $10,220. If your Social Security benefit is $12,000 you must subtract $10,220, leaving you with a net benefit of $1,780. Only you can decide if you want to do this with such a reduction of benefit.

Once you reach your full retirement age there are no limits on how much you can earn.

Already retired? Already have enough for retirement?

Let’s say you are in your mid-60s and not collecting Social Security yet. Let’s further assume you have a $1 million investment portfolio. You are also doing an annual withdrawal of 4% equaling $40,000 a year to help cover your living expenses.

If the market crashes 20% and your portfolio goes down 20% you would now have a portfolio worth $800,000. You still need $40,000 worth of income from the portfolio. So now you would be taking 5% instead of 4% from the portfolio. At this point, you could lower the amount you are taking from the portfolio by starting your Social Security payments.

At age 67, assume your Social Security benefit is $24,000. Then you would only need to withdraw $16,000, or 2%, from your portfolio. By doing this, it would help your portfolio grow back sooner to get back to your original $1 million.

Have you reached full retirement age? Are you retired? Is your spouse still working but not making much? Does your spouse have low Social Security wages?

It might be worth taking Social Security so your spouse can get their spousal benefit. Spousal benefits stop increasing after the primary earner reaches full retirement age. The spousal benefit is 50% of your benefit at full retirement age. If your benefit is $40,000 a year and your spouse is $12,000 a year at full retirement, she can collect $20,000 a year instead of $12,000.You are both at full retirement age, so you will get the full benefit. If your spouse wants to collect before her full retirement age she can. However, there is a reduction in benefit from age 62 to full retirement age. For example, the benefit is $13,596 at age 62 for the spouse.

You will get the greatest benefit from Social Security if you can wait until age 70 to take it. One of the rewards for waiting is the fact that from age 62 to age 70 the benefit will increase about 8% a year. That is a guarantee. You might seriously consider using other resources for income to enable you to wait to get this increasing benefit.

There are many older couples living together but not married. The general rule is a couple must be married for one year to qualify for Social Security. Once that is met, then they come under the same requirements previously Covered.

You should consider registering on the Social Security website that has all the information you may want. Go to http://ssa.gov or call 800-772-1213.

Vern Hayden is a certified financial planner and the author of “Getting an Investing Game Plan.” Bill Brancaccio contributed to this column.