Once upon a time, I promised a blog post on when you should take Social Security. Procrastination pays off because The Motley Fool just ran a post that did it for me. The short version: take your benefit as soon as you can (i.e., age 62). The trade-off is to wait and increase your monthly benefit at the expense of lower overall payout from Social Security.
Your “full” retirement age is between 65 and 67, depending on your year of birth. For younger generations, that age will probably increase as the system becomes insolvent. Currently, your monthly benefit increases about 8% for each year you delay your benefits. That could be the right decision if you don’t have enough savings to supplement your benefits. You will need your own savings because the current average Social Security benefit is only $1,372 per month. That’s $16,646 per year, barely above the poverty line for a two-person household. The maximum benefit at “full” retirement age is $2,687 per month ($32,244 per year).
Of course, all this Social Security talk only applies to those lucky enough to reach age 62 while Social Security is still solvent. According to the Board of Trustees, Social Security will pay more in benefits than it collects in taxes, starting in 2034. So if you’re under age 45, you’d better start saving to fund your own retirement. The earlier you start, the better, because of the power of compound interest. Learn more in Basic Personal Finance.