As we enter retirement, we begin to think about how we can use the resources we have spent so long planning for. Social Security can be an important part of our retirement strategy, but first, we need to understand what Social Security is and how to use it.

When You Can Start And How Much You Will Receive?

The Social Security Administration (SSA) administers Social Security retirement benefits to those who are eligible. Your age determines eligibility for these benefits in relation to the year you were born. While the calculation can be somewhat complicated, the SSA has provided a calculator to determine what you will receive depending on your date of birth, current income, and retirement date. To use this calculator CLICK HERE.

The SSA determines each person’s Full Retirement Age and uses that age as the benchmark. Your full retirement age is the age at which you will receive 100% of your Social Security benefits. 

You can choose to receive benefits up to 5 years early; however, the amount you receive will be reduced by 30% if you elect to receive it five years before full retirement age.  You can also postpone until you are 70 to receive a higher amount which increases every month until then—waiting until the last month would result in an increased benefit of 132% of your Full Retirement Age 100% benefit.

What Time Is the Right Time to Start?

Our answer is to begin right away! While this question can initially seem like a complicated risk calculation of life expectancy vs. benefit amount, it is, in reality, much simpler. Consider the situation where you elect to receive your benefit at a reduced amount at 62 rather than waiting until full retirement age at 67 or increased benefit age at 70. At 62, you would begin receiving a reduced amount compared to waiting, and at first glance, this can seem like a bad idea. However, the Time Value of Money principle can show us how taking your benefits as early as possible has the greatest potential earnings. 

The Time Value of Money principle is that the money you have now is worth more than the identical sum in the future due to its potential earning capacity. So how does this apply to your Social Security benefit? Simply put, by taking your money as soon as possible, you can use that money in more effective ways. Whether it is in investments or savings, that money will begin to grow exponentially and avoid some of the pitfalls of inflation. As a result, your reduced Social Security benefit amount taken and invested at 62 will have five years of growth by the time you reach the full retirement age! The prospective earnings will exponentially improve your retirement and will also come at a younger age when you are more able to take advantage of them. The extra growth from early investment can accelerate your earnings that would otherwise take close to 20 years to realize.

There is some nuance here. If you are still actively working, there can be a tax penalty for taking your Social Security benefits before your full retirement age. Ensure that you don’t fall into an income category that would incur a tax penalty before full retirement, or the Social Security benefits will no longer be effective.


Social Security benefits can be tricky to understand completely but can also be extremely important for an effective retirement. Proper research can be done to ensure that we have all the information we need to make informed decisions. Understanding the Time Value of Money and having an effective investment strategy will help ensure your immediate and future success. By taking advantage of your Social Security benefits as soon as possible, you can create the best possible outcome in the shortest time.

If you’re pondering this situation, whether to invest all at one, please feel free to reach out to me at Chase Thomas and I’ll be happy to discuss it and possibly show you better strategies to accomplish your goals.