In a recent episode of “The Ramsey Show,” hosts Rachel Cruze and Jade Warshaw offered financial advice to Lloyd of Raleigh, NC. Lloyd, who will turn 66 in four months, has been living off the principal of his $220,000 401(k) but wondered if it might be more advantageous to start drawing Social Security benefits instead.
Throughout the call, Lloyd reveals that he would receive about $2,000 monthly from Social Security and that his monthly “bare bones” expenses are around $1,700.
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Cruze quickly pointed out that pulling Social Security benefits, while they could be higher by waiting longer, will be more beneficial now. She said, “The longer you don’t pull on the Social Security, the more you will get. But at that point in life, if you’ve taken it early and you can live off that and not touch the 401(k), that will continue to grow.”
Cruze’s advice aligns with common financial strategies of drawing Social Security benefits to help preserve and grow retirement savings. While some experts advocate for delaying Social Security to maximize monthly payments, Lloyd’s situation with his relatively low expenses and decent 401(k) savings could make withdrawing early a practical choice.
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According to Bankrate, the average retiree starts taking Social Security at age 65, but the age at which anyone pulls Social Security should be considered along with their circumstances. For some people, like Lloyd, it could make a lot of sense, but for others it may be more advantageous to wait until full retirement age to get the maximum monthly benefit.
The experts at Charles Schwab state that there are a few considerations to look at when determining the best time to take Social Security benefits: your cash needs, your life expectancy, your marital status, and your employment status.
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If you have sufficient resources to support yourself financially, you can be a little more flexible about when you take out Social Security. But if you need the funds to make ends meet, postponing retirement until you can receive the maximum benefit may be beneficial.
Waiting for a larger check can be a good option if you are relatively healthy and think you’ll exceed the average life expectancy. On the other hand, if your health is poor, you might take the early payments to support you.
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Marital status – whether you’re still married, divorced, or widowed – can play a large role in the benefits you receive. So consider this and weigh all of your options before withdrawing.
Being employed when you pull Social Security can reduce your benefits temporarily if you take Social Security early. However, those benefits won’t be reduced if you wait until full retirement age and are still working.
Choosing the best time to withdraw from Social Security can be challenging. As you weigh your options, consider contacting a financial advisor whose expertise can help you better navigate the process.
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This article The Ramsey Show Hosts Tell 65-Year-Old Retiree To Start Pulling Social Security Instead Of Living Off His $220,000 401(k) originally appeared on Benzinga.com
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