I talked with a client this week about the various social security claiming strategies. It’s an important question for everyone to consider so let’s take a closer look.

Social security is a US federal insurance program funded by payroll taxes. It provides guaranteed, inflation-adjusted monthly income to eligible retirees, as well as disabled workers and the dependent survivors of deceased workers.

Deciding when to take Social Security depends heavily on your circumstances. You can start collecting Social Security benefits as early as age 62 (or sooner if you’re disabled), wait until you reach your full retirement age, or hold off until age 70.

Taking benefits earlier provides income sooner but also permanently reduces the monthly payment. Taking benefits later increases the monthly amount for life – but starts the process later. If we knew how long we would live, this would be an easy exercise. However, with the uncertainty of life expectancy, you instead need to make the best decision based on what you know and your overall financial situation when the time comes.

When making this decision for yourself, here are a few things to consider:

*Full retirement age – based on the year you were born, you have been assigned a full retirement age. This is the age at which you will receive 100% of your benefits. You can find this on your Social Security Statement. For most of you not already claiming benefits, that age is 67.

*Variance in benefits – if you claim at 62, your benefits will be reduced 30% (forever). Between 62 and 67, that reduction declines, with the discount being ~6% if you claim a year early. On the flip side, you can defer up until age 70. This increases your benefit by 8% a year (max benefit is 124% of full retirement benefit).

*Impact of employment status- if you take social security before your FRA, you will be limited on the amount of wages you can earn. If you exceed that limit ($24,480 in 2026), $1 in benefits will be deducted for every $2 you earn above the annual earnings limit. Thus, if you are still working, there is a decreased cash flow benefit from claiming early, often making it not worth the haircut you will incur.

*Impact of marital status – If you’re married, your spouse’s age, health, and earnings history may affect when you claim—especially if one spouse is the higher earner. At full retirement age, you can generally receive either your own full retirement benefit or up to 50% of your spouse’s benefit, whichever is higher.

*Cash flow needs – Consider the other sources of cash flow you have from ages 62 to 70. If you are still working and/or have access to other cash flow from investments, you may not need to access social security as quickly as you otherwise would

*Taxation – Social security is included in taxable income (85% of it) at the federal level. It is exempt from state tax in certain states (like Wisconsin). Keep this in mind when deciding when to claim.

*Longevity hedge – the main benefit of waiting is locking in a higher payment for longer. This can act as a powerful longevity hedge.

As you can see, timing of claiming is highly individualistic decision. Here are some general rules of thumb but be sure to asses your own situation with your advisors before taking any action.

When you may consider taking benefits early

• You’re no longer working and can’t make ends meet without your benefits.
• You have health issues that may limit your life expectancy
• You’re the lower-earning spouse, and your higher-earning spouse can wait to file for a higher benefit

When you may consider taking benefits late

• You’re still working and make enough to provide sufficient cash flow and/or earn enough that taxability of social security would be lower if you wait
• Either you or your spouse are in good health and expect to exceed average life expectancy.
• You’re the higher-earning spouse and want to be sure your surviving spouse receives the highest possible benefit
• You have access to other sources of cash flow making you indifferent to claiming at a given time (wages, investment income, other savings, etc)

I know that “it depends” answers can be frustrating but that is the reality of many financial questions. As these milestones approach for you, carefully evaluate your situation with your advisors and make the best decision you can with the information at hand.