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For those concerned about having financial security in retirement, deciding when to begin Social Security benefits can be challenging.

Financial adviser Mark Tholl, with WealthSpan Partners in Davenport, said figuring out the right time to start benefits is a common question from clients reaching retirement age.

"The ideal time to take those benefits is a big part of the financial planning we do," Tholl said. "And I think there's quite a bit of confusion around the timing of benefits. And ultimately, the appropriate decision is determined by one’s life expectancy, a variable not easily defined.”  

The age you begin receiving Social Security benefits is a major factor in determining the amount you'll receive throughout retirement. Tholl said a more conservative strategy is to delay benefits, as benefits compound at an attractive rate the longer one waits.

But, Tholl said there is no perfect time to start taking benefits, as each individual's situation is different. Here's some of his advice on what to consider when figuring out how to make the most of your benefits.

Should you delay claiming benefits?

Whether you should delay claiming Social Security benefits is partly influenced by the amount of fixed pension income one has in retirement, Tholl said.

For someone with healthy pension benefits in place, the decision on when to start Social Security benefits might be a bit easier than the decision for someone who has no pension and relies entirely on their investment assets and Social Security for income. For those without a steady pension in place, the timing of Social Security benefits is important.

Tholl said other factors to consider are your overall health, the longevity in your family and your financial circumstances.

Collecting Social Security benefits before full retirement age means your benefit will be reduced. Delaying benefits after full retirement age will increase your benefits by 8 percent annually until age 70, resulting in larger monthly payments.

If you need the financial assistance early, and don't think you'll live long enough to regain the money you didn't earn by delaying your claim, taking Social Security early may be an appropriate option.

But for others, delaying Social Security benefits may result in substantially more income over a normal life expectancy.

Before you decide, it’s important to determine the break-even point, how many years do you need to collect benefits in order to replace the benefits not taken at age 62. 

What are the advantages of delaying?

If you retire at full retirement age — which is determined based on the year you were born — you'll receive the standard benefit amount based on your average wages over 35 years.

For every year benefits begin early, they are reduced by 6.66 percent each year, for the first three years, and then reduced by 5 percent for additional years. If you collect benefits after full retirement age, benefits increase by 8 percent each year until age 70.

Many advisers suggest calculating the age in which you'll break-even, the point in time when higher monthly benefits offset the financial loss of not collecting at age 62. To figure out your break-even point, you need to determine how much benefits are affected by claiming early or delaying.

Another benefit of delaying benefits is your spouse will be entitled to a higher survivor’s benefit in the event of your premature death. Other strategies to consider for dual wage earners, involve waiting to full retirement age and filing a restricted application for spousal benefits, allowing your own benefits to grow until age 70, and then collecting the higher individual benefits.  Unfortunately, this strategy only applies to those born before January 1, 1954.

The Social Security Administration offers calculators to estimate the benefits you would receive at each age. The calculator can help you determine your monthly benefit at each age, and then allow you to compare how long it would take to break even and receive larger payments.

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