Spend Savings Now or Delay Social Security? How to Decide

Millions of Americans approaching retirement face one of the most consequential financial decisions of their lives: whether to tap personal savings early in order to delay claiming Social Security benefits, or claim Social Security sooner and let their investment portfolio keep growing. The choice hinges on a complex set of factors including life expectancy, portfolio size, and monthly cash flow needs.

Delaying Social Security past age 62 — the earliest eligibility age — increases monthly benefits by roughly 6% to 8% per year up to age 70, making the wait potentially lucrative for those who live into their 80s or beyond. By drawing on personal savings in the interim, retirees can lock in a significantly higher guaranteed monthly payment for the rest of their lives, which also provides a hedge against outliving their money.

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On the other side of the ledger, claiming Social Security early preserves more of a retiree's investment portfolio, allowing those assets to remain in the market and potentially compound over time. For retirees with strong investment returns or a shorter expected lifespan, this approach could yield better overall financial outcomes than waiting for a larger Social Security check.

Financial planners generally caution that there is no universal right answer. Key variables — including a retiree's health, spousal benefit considerations, tax implications, and other income sources — all influence which path makes the most sense. Running a detailed break-even analysis can help determine the age at which delayed benefits would outpace the growth of a tapped portfolio.

Ultimately, the decision requires honest self-assessment of personal health, risk tolerance, and financial goals. Consulting a certified financial planner before making an irreversible claiming decision is widely recommended. Continue reading at MarketWatch.com.