Yet Another Reason to Avoid Taking Social Security Early (the annual earnings limit)!

Taking social security early sometimes makes sense…

But not very often.

You’re much better off maximizing the guaranteed returns provided by social security and using your other retirement assets to fund your lifestyle, especially if you plan on retiring early. 😎

Now most people think taking social security early is best and seems to be the “common wisdom” on social security, but you are simply giving away too much benefit if you do (it’s just the truth).

You’re locking in a lower benefit for you, for your spouse, and giving yourself less of a hedge against inflation in retirement.

You’re also locking in a much lower guaranteed income stream that can hurt you very badly if you ever need long-term care.

But, you’re also preventing yourself from EARNING money from age 62 to 70 (which is when most people make the most of their wealth)!

Here’s how it works (based on 2023 figures):

✅ Between age 62 and your full retirement age (FRA — usually 66 or 67) you can only make $21,240 or you’re going to penalized (heavily).

For every $2 you make above that, you’re going to have $1 taken away from your social security benefit (a 50% penalty)‼️

✅ The year you reach FRA the limit goes up to $56,520 and the penalty is reduced…

Now every $3 you make above this new threshold is penalized by $1 dollar (only a 33% penalty now… I’m being sarcastic).

This means if you’re making $200,000 per year you’re going to pay almost $48,000 in penalties (that’s likely more than your social security check so you basically won’t even be able to collect it).

Now, if you wait until after your FRA, there is no penalty.

Plus, remember that your social security benefit will grow at 8% per year, every year you wait past FRA (and the longer you wait, the more time you have to reposition other assets to retire tax-free).

So not only are you gaining 8% per year by waiting, but you’re able to continue maximizing your income in your PEAK earning years.

This is huge.

So once again, waiting until at least your FRA is (typically) the right move if you have done a good job planning for retirement.

Now I know not everybody commenting on my instagram videos believes that taking it early is the best idea, but I stand by my claim:

In most cases, you should absolutely wait as long as possible to take your social security.

P.s. Pensions, investment income, and annuities do NOT count against this rule….

Let’s chat 💬😎