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Before you turn your Social Security on, there are a number of different considerations to make.
If you live to a normal life expectancy, (say you turn on Social Security in your sixties and live into your mid-eighties) you could easily collect over a million dollars in benefits over your lifetime, depending on your payout.
That’s not a small decision. So this isn’t something that should be made flippantly. It deserves a little more confidence.
The Two Mindsets I See Most Often
When people are deciding when to turn on Social Security, I usually see one of two dominant mindsets.
1.“Why would I touch my own money?”
This person likes seeing their IRA balance go up. They don’t want to start withdrawing money from it, so they think: Why would I withdraw from my own account when I can just turn on Social Security and spend the government’s money?
On the surface, that feels smart. Let the IRA keep growing. Use Social Security instead. It might even be the right decision, but it's a big assumption. I like to call it the social security default. Unfortunately for many retirees, it's the wrong decision.
2. The Break-Even Calculation
The second mindset is more analytical. This person pulls out their Social Security statement and compares the numbers at different ages—maybe 65 versus 70. Then they calculate how long they would have to live in order to “make up” the benefits they gave up by waiting. That’s called a break-even calculation. It’s helpful, but it’s not the whole story.
What Often Gets Overlooked: Taxes
There are many nuances to Social Security that need to be considered. One of the biggest? Taxes. Now, this isn’t the same for everyone.
Some people haven’t saved a lot for retirement. They need Social Security to live on. In those situations, there may not be much flexibility, and taxes may not drive the decision. However, for people who have done an excellent job of saving (those with large retirement accounts), taxes become a major part of the equation.
If you have significant money in an IRA or 401(k), turning on Social Security changes:
⦁ Your taxable income
⦁ How much of your Social Security becomes taxable
⦁ Your ability to control withdrawals from retirement accounts
For these individuals, I often say, "It’s not over yet." You still need to do some planning.
Before You Turn It On
Before you flip the switch on Social Security, slow down and make sure you’re not just thinking about:
⦁ Watching your IRA grow
⦁ Or calculating a break-even age and calling it a “data-driven decision.”
What often gets overlooked are the long-term side effects of turning Social Security on too early. When you claim early, you are locking in a permanently reduced benefit. That lower payment does not just affect this year or next year. It affects every cost-of-living adjustment going forward. It also affects a surviving spouse if you are married, since the higher earner’s benefit often becomes the survivor benefit. A decision made at 62 can ripple forward 20 or 30 years.
There is also the coordination issue. If you turn on Social Security before you truly need it, you may unintentionally miss planning opportunities. Lower-income years before required minimum distributions begin can be valuable windows for Roth conversions or strategic withdrawals. Once Social Security is added to the mix, your flexibility narrows. That does not mean claiming early is always wrong. It simply means the decision should be made in the context of your full retirement income and tax strategy, not in isolation.
No Silver Bullet, Just a Good Conversation
Now, of course, we have to say what every good financial advisor should say: the right decision depends on your specific financial situation. There is no silver bullet. That said, it is always good advice to have an educational conversation with someone who has seen hundreds of retirement plans before moving forward.
We help our clients model the impacts of critical decisions, like when to start Social Security, so you can understand how the decision fits into your plan and account for potential downstream impacts.
This material is intended for informational/educational purposes only and should not be construed as investment/tax advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
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