Should I Take Social Security Early?

Should I take Social Security early? This question weighs heavily on the minds of many approaching retirement, particularly those who have worked hard to build substantial wealth over their careers. The decision involves significant trade-offs between immediate financial security and long-term retirement income optimization that can significantly impact your overall financial well-being.

The short answer is that for most high-net-worth individuals, delaying Social Security benefits beyond the earliest claiming age of 62 typically offers greater financial advantages. While claiming early reduces your monthly benefit by up to 30%, waiting until full retirement age (66 – 67) or even until age 70 can substantially increase your lifetime benefits.

However, your unique financial situation, health considerations, and retirement goals may warrant a different strategy. Schedule a conversation with the team at Avidian Wealth Solutions to develop a personalized Social Security fund strategy that aligns with your comprehensive vision and aims to maximize retirement savings and your long-term financial security.

When to take Social Security: early vs. late

For any pre- and post-retirees, one decision you’ll have to make as part of your retirement income planning is determining the optimal timing for your Social Security benefits. Should you take Social Security early or late? 

Let’s examine the key advantages and disadvantages of early claiming and delaying your benefits:

Timing	Advantages	Disadvantages
Claiming early (age 62)	Immediate income and peace of mindUseful if you have health concerns or shorter life expectancyCan support a tax strategy for high-net-worth individuals in low tax bracketsAllows investments to keep growing	Permanent reduction in monthly benefits (up to 30%)Earnings test applies if you continue workingMay lose out on higher lifetime income if you live longer
Delaying (after full retirement, up to age 70)	Benefits grow ~8% annually via delayed retirement credits76–84% higher benefits than claiming at 62Helps preserve other assets and support legacy planning	Risk of dying before breaking even on delayed benefitsMisses years of guaranteed incomePossible (though unlikely) future changes to Social Security rules

Advantages of taking Social Security early

Taking Social Security at age 62 can offer immediate financial security and peace of mind, particularly if you’re concerned about potential program changes or have health issues that may affect your longevity. Early claiming allows you to begin receiving benefits right away, which can be valuable if you need the income to bridge the gap until other retirement assets become accessible. Additionally, if you have reason to believe you may not live past your late 70s, claiming early could result in receiving more total lifetime benefits despite the reduced monthly payments.

For some high-net-worth individuals, taking Social Security early while allowing other investments to continue growing can be part of a sophisticated retirement tax strategy, especially if you’re in a lower tax bracket during early retirement years.

Disadvantages of taking Social Security early

The primary drawback of early claiming is the permanent reduction in your monthly benefits — up to 30% less than what you’d receive at full retirement age. This reduction compounds over time, potentially costing you hundreds of thousands of dollars in lifetime benefits. Early claiming also triggers the Social Security earnings test if you continue working, which can temporarily reduce or eliminate your benefits if your earned income exceeds certain thresholds.

For high-net-worth retirees who don’t need the income right away, claiming early can mean missing out on the full value of one of the few reliable, guaranteed income streams available in retirement.

Advantages of delaying Social Security benefits

Waiting to claim Social Security offers compelling financial advantages for most retirees. For each year you delay beyond your full retirement age until age 70, your benefits increase by approximately 8% annually through delayed retirement credits. This guaranteed return is difficult to match in today’s investment environment and represents a significant boost to your lifetime income.

The financial impact is substantial: waiting until age 70 can result in benefits that are 76-84% higher than what you’d receive at age 62. For wealthy retirees who don’t immediately need the income, this delay strategy can optimize their Social Security benefits while making room to preserve other assets for legacy planning or unexpected expenses.

Disadvantages of delaying Social Security benefits

The main risk of delaying Social Security is the possibility of not living long enough to recoup the benefits you forewent during the delay period. If you pass away in your early 70s, you may receive less in total lifetime benefits compared to claiming early. Additionally, delaying benefits means you’re not receiving guaranteed income that could be invested or used to reduce withdrawals from other retirement accounts.

There’s also the consideration of potential future changes to Social Security that could affect benefit levels, though this risk is generally considered low for those already near or at retirement age.

Tax implications of Social Security timing

The timing of your Social Security benefits can have significant tax consequences that extend far beyond the monthly payment amount.

How Social Security benefits are taxed

Social Security benefits may be subject to federal income tax depending on your “combined income,” which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. 

• If your combined income exceeds $25,000 as an individual or $32,000 as a married couple filing jointly, up to 50% of your benefits become taxable. 
• Once your combined income surpasses $34,000 (individual) or $44,000 (married filing jointly), up to 85% of your Social Security benefits may be subject to federal taxes.

For wealthy retirees, this often means that 85% of Social Security benefits will be taxable regardless of when they claim, making the timing decision more about overall income management than mitigating Social Security taxes specifically.

Strategic timing for tax optimization

Delaying Social Security while drawing from tax-deferred retirement accounts first may create opportunities for Roth conversions during lower-income years before Social Security begins. This strategy allows you to pay taxes on retirement account distributions at potentially lower rates while your overall income is reduced. Once you begin receiving Social Security, your taxable income floor increases, potentially pushing you into higher tax brackets and making future Roth conversions more expensive.

Conversely, claiming Social Security early while allowing tax-deferred accounts to continue growing can make sense if you’re in a temporarily low tax bracket and want to minimize the total taxes paid on those accounts over time. However, this approach sacrifices the guaranteed 8% annual growth from delayed retirement credits.

State tax considerations

While Social Security benefits are exempt from federal taxes in some scenarios, state tax treatment varies significantly. For Texas residents, this creates a particularly favorable environment for Social Security planning. Texas does not currently impose a state income tax, which means your Social Security benefits are not subject to state-level taxation, regardless of when you choose to claim them or how much other retirement income you receive.

This tax advantage makes Texas an attractive state for wealthy retirees and can influence your Social Security timing strategy. Without the concern of state taxes on your benefits, you can focus on federal tax optimization and the financial benefits of delayed claiming. 

The absence of state income tax also means that other retirement income sources — such as distributions from traditional IRAs and 401(k)s — won’t face additional state-level taxation, potentially making it more advantageous to delay Social Security while drawing from these accounts first.

Social Security age — FAQs

What is the break-even point for taking Social Security early?

The break-even point for taking Social Security early versus waiting until full retirement age typically occurs around age 78 – 80, depending on your specific benefit amount. If you live beyond this age, you’ll receive more in total lifetime benefits by waiting until full retirement age rather than claiming at 62. This calculation becomes even more favorable if you delay benefits until age 70, with the break-even point extending to the early 80s.

Is it better to take Social Security at 62 or 67?

For most high-net-worth individuals, waiting until age 67 (or your full retirement age) is generally the better financial decision, as it avoids the permanent 25 – 30% reduction in monthly benefits that comes with early claiming. 

However, if you have health concerns that may limit your longevity or immediate financial needs that can’t be met through other assets, claiming at 62 might make sense. The decision ultimately depends on your health, financial situation, and whether you need the income immediately.

Does it make sense to take Social Security at 62 and invest it?

Taking Social Security at 62 and investing it can make mathematical sense if you can consistently earn returns that exceed the 6 – 8% annual increases you’d receive by delaying benefits, but this strategy comes with market risk that guaranteed Social Security age benefits don’t have. 

For wealthy retirees who embrace the philosophy of “don’t retire: rewire” and continue earning income in their 60s, this approach may trigger the earnings test and reduce Social Security benefits. Most financial advisors recommend that affluent retirees delay Social Security while drawing from other investments first.

Ready to maximize your Social Security benefits? Let’s talk.

Should I take Social Security early? Unfortunately, this question doesn’t have a one-size-fits-all all answer, especially for high-net-worth individuals with complex financial portfolios and diverse retirement goals. The decision requires careful analysis of your health, life expectancy, taxes, and overall wealth strategy to maximize Social Security and retirement income.

At Avidian Wealth Solutions, our comprehensive retirement planning services are designed specifically for affluent retirees who understand that Social Security optimization is just one piece of a sophisticated financial puzzle. Our experienced team works with clients throughout Texas, including Houston, Austin, Sugar Land, and The Woodlands, to develop personalized strategies that integrate Social Security timing with tax planning, estate considerations, and legacy goals.

Schedule a conversation with our team today to discover how a Social Security strategy can enhance your overall retirement plan to help you make the most of the wealth you’ve worked so hard to build.

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