When to take Social Security is a critical decision every retiree must make, and given the tough economic times lately, many retirees look closely at taking benefits early in order to supplement their income. But sometimes, that's not the right move, and you'd be much better off waiting longer before starting to get monthly payments.
In the following video, Motley Fool investment planning editor Lauren Kuczala talks with longtime Fool contributor and retirement planner Dan Caplinger about three situations in which taking early benefits can really cost you. Dan notes that if you're still working and take Social Security, you can end up having to forfeit some of your monthly payments if you earn more than a certain amount. In addition, if you're currently in a high tax bracket but expect your tax rates to fall in the future, waiting can save you thousands in taxes, as up to 85% of Social Security benefits count as taxable income if you earn more than a certain amount of income. Finally, taking Social Security before you have a full 35-year work history can cost you a lot in benefits. Dan gives some guidance for people in all three situations to consider in order to make the best choice for their situation.
If you're still looking to invest for a more prosperous retirement, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.
The article When Taking Social Security Early Is a Big Mistake originally appeared on Fool.com.
You can follow Dan on Twitter: @DanCaplinger. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.