When Should I Collect Social Security?

March 9, 2023
Current forecasts project a Social Security shortfall in about a decade. Knowing when to collect can help you maximize your benefits. Find out when could be the right time for you to start collecting Social Security payments.

For years, the Social Security Board of Trustees has warned against a projected shortfall that, if unaddressed by Congress, would require the program to reduce benefits to recipients. In 2010, the board estimated a 22% cut in benefits after 2037; today, it predicts a 23% reduction after 2034—little more than a decade away.

So, just how worried should future retirees be—and is it cause to rethink when to start collecting benefits?

"Despite the sensational headlines, Social Security isn't going anywhere," says Mike Townsend, managing director of legislative and regulatory affairs at Schwab. "The program currently brings in less than it pays out, and at some point its reserves could be exhausted—but that's only if Congress fails to act, which seems unlikely."

The most obvious solutions include raising the retirement age or increasing the payroll tax rate, both of which have been implemented in the past to address similar insolvency concerns. By some estimates, raising the payroll tax just 3.24 percentage points to 15.64%—the cost of which is split evenly between employer and employee—would allow the program to remain fully solvent for another 75 years.1 However, some solutions are likely to be unpopular with Congress members and voters alike. "It's going to be a protracted negotiation, so we may not see any changes from Congress until the eleventh hour," Mike says.

Whatever the outcome, you shouldn't collect benefits earlier than planned unless your situation changes, such as a decline in your health. That's because collecting before your full retirement age (FRA)—between ages 66 and 67, depending on your birth year—means locking in a lower benefit for life. For each year you delay beyond your FRA, up to age 70, you'll receive an 8% increase, which benefits not only you but potentially a surviving spouse.

"Social Security is a form of income insurance," says Rob Williams, managing director of financial planning, retirement income, and wealth management at the Schwab Center for Financial Research. "Payments are promised for life—with annual cost-of-living adjustments that are attractive and often unmatched in other income products—so you want to do everything you can to maximize its potential."

1The 2022 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, ssa.gov, 06/02/2022, www.ssa.gov/oact/tr/2022/tr2022.pdf.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

The policy analysis provided by Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

Schwab Wealth Advisory™ (SWA) is a non-discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. (Schwab). Schwab Wealth Advisory, Inc. (SWAI), is a Registered Investment Advisor and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.