When Should You Start Drawing Social Security?

This article is an excerpt from the Shortform book guide to "The Simple Path to Wealth" by JL Collins. Shortform has the world's best summaries and analyses of books you should be reading.

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What is the earliest age you can collect social security? What factors should you take into account when deciding when to receive your social security payouts?

Choosing when to start drawing social security is an important decision. You can claim Social Security starting at age 62, but the sooner you start, the smaller your checks will be. The longer you hold off up to age 70, the larger they’ll be, but you’ll have fewer years to collect them.

Here is what financial blogger J. L. Collins has to say on drawing your social security.

The Social Security System

The Social Security system has been sustainable in the past, but as large numbers of Baby Boomers retire and live longer, the payroll taxes that support it will fall short of payouts if nothing is done to fix it.

Thus, depending on your current age, your experience with Social Security likely will vary. Collins argues that:

If you’re 55 or older, you’ll collect the full amount you’re entitled to because politicians won’t take anything away from such a large group of voters. That’s why the solutions proposed so far to shore up the system only affect those 55 and under.

If you’re under 55, you won’t get the same deal, but you’ll still receive benefits. You can expect that:

You’ll get any benefits you’re promised, but they’ll be smaller than those older recipients are getting today.
The benefits will cost you more. The income cap—the amount of income on which you pay Social Security taxes—will keep increasing.
The full retirement age will continue to go up.
Benefits may be determined by need rather than how much you paid in.
Congress will keep making changes but Social Security will survive.

Social Security is a good deal for most people over 55. Of course, if you invested the 6.2% of your income that goes to social security and the 6.2% your employers contribute, you’d be better off financially in later years. But many people don’t save or invest for retirement, so Social Security will keep them out of poverty in their last years.

Determining When to Take the Money

Some advisors offer complicated strategies, you’ll be better off keeping things simple. When deciding when to start drawing Social Security, consider the following in order:

When do you need the money? If you need it now, take it—but for each month you’re able to delay, your monthly payment will increase.
How long do you expect to live? Are you in good health? Do you come from a long-lived family? The longer you live, the more you stand to gain by delaying payments. The break-even point for people between the ages of 62 and 66 is 84, meaning that if you live longer than 84 years, you’ll collect more if you wait until after age 66. You might want to claim benefits sooner if you don’t think you’ll live to age 84.
If you’re married and earn more than your spouse, when you die, your spouse can swap their benefit for your larger one. If you put off taking Social Security until age 70, your spouse will get more when you die. In the interim, they can claim their lower benefits.

Although Social Security likely will survive in some form, plan as though Social Security won’t be there for you—that is, follow the simple path to wealth of living beneath your means, staying out of debt, saving F-You money, and investing in index funds. If you get Social Security, it will be a bonus.

When Should You Start Drawing Social Security?