When to Start Collecting

Mark asks if there is a formula or rule of thumb for determining if it's better to start drawing Social Security at age 62 or when you are fully vested at age 65.

QUESTION: Mark in Louisiana asks if there is a formula or rule of thumb for determining if it’s better to start drawing Social Security at age 62 or when you are fully vested at age 65. Dave tells him how Mark can get the numbers to work more in his favor.

ANSWER: It might be worth it if you take it early, then invest every bit of what you’re taking and create a nest egg by doing that.

If you want to do an intellectual exercise and say that you’ll start collecting at age 63 to age 67.8 or whatever it is, then that will create X amount of dollars in there. If that money is invested in a mutual fund, it should throw off Y amount of money, and I think that will cover the difference most of the time. Social Security is different from person to person, obviously.

There is one other piece of information to keep in mind. If you take it early and invest it all, whatever nest egg it creates, your family gets that when you die. When you die with Social Security, they get nothing. I like taking it early if you are disciplined enough and you have enough other things going on to support you to where you don’t really need the money, and you just invest it.

But people who actually live on it, I’ll actually try to get them to work a few more years and take it as late as they can take it because they will need it.

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