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When should you collect social security benefits?

Let’s be conservative.

If the same $201,448 remained invested earning an average return of 5% (which is well below historical long-term market averages), that would compound into $297,630. It is widely accepted based on countless financial planning studies that a properly balanced investment portfolio can sustain a 4% withdrawal strategy for 30 years increasing with inflation without depleting assets to zero. If you were to wait until age 70 to begin withdrawals, a 4% withdraw should be more than sustainable and quite reasonable. Even a 5% withdrawal at age 70 is highly plausible. In the interest of remaining conservative in the assumptions used, we will use the 4% withdrawal approach.

The pool of investment dollars has compounded to an additional $297,630 because Client A did not need to draw on these assets due to the early SS benefit supplementing their income, how much is this worth as an income?  Using a 4% withdrawal strategy annually from $297,630 beginning at age 70, you have an annual income in year one of $11,905. This figure is still smaller than the difference between your age 70 benefit and the age 62 benefit ($44,792-$25,181=$19,611). That is a difference of $7,706 annually. So why would it be better to realize the lower income?

Joe Favorito

Joseph Favorito is a Certified Financial Planner™ who began his career in the financial services field in 1997. Over the past two decades Joseph has worked for several New York stock exchange members. In 2011 he founded Landmark Wealth Management, LLC , a Long Island-based Securities Exchange Commission registered investment advisory firm.