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Life Events: Retirement

When should I start taking Social Security benefits? What role can stock compensation play in my decision?

No simple answer exists to the question of whether you should take benefits early, at the age you are considered at "full retirement" as defined by Social Security rules, or at a later date. The later you take your benefits, the larger your payment will be (check your annual Social Security statement with your personal benefits estimate from the Social Security Administration). Your benefits increase about 8% per year while you delay taking them, up to the age of 70. Then your payment remains level. According to the way the actuarial calculations work, if you live to your full life expectancy, you will receive the same total amount whether you take benefits early, at full retirement, or later. When you get it later, your checks are just bigger but you get fewer of them.

One strategy when you have good health, a sizeable portfolio, and other income sources (e.g. stock option exercises or restricted stock vesting) is to wait until you are 70 to begin receiving Social Security benefits. This gives you a larger safety net if your investments, including your company stock holdings, drop in value and you need more money later in life for other needs. Even if you die before reaching 70, your spouse's benefits will be larger than they would be if you had started taking benefits earlier.

In addition, when you have substantial earned income, if you start taking Social Security benefits early, your payments will be reduced for earned income over the allowed limits, and the payments will probably be taxed. Whatever the case, the right decision about when to start collecting Social Security ultimately depends on how long you live. has a tool that can help you determine when to start taking benefits.

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