Nearly all American workers are eligible for Social Security benefits, and people can choose to start collecting their monthly checks at any time between the ages of 62 and 70. Full retirement age is currently set at 67 years old for workers born in 1960 or later, and as the phrase implies, this is the claiming age at which you’ll collect your full Social Security benefit as calculated from your work history.
Having said that, not many people are willing to wait.
Nearly 90% of eligible Americans claim Social Security at or before their full retirement age, with about a third of beneficiaries claiming at age 62, as early as possible. Only 6% of women and 4% of men waited until age 70 to start collecting benefits in 2018. But if you are one of the few who can hold out and start claiming later, it could have a significant impact on your financial life after retirement.
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If you choose to claim Social Security before reaching your full retirement age, your benefit will be permanently reduced. On the other hand, if you can wait longer than your full retirement age — up to age 70 — your benefit will be adjusted higher.
For workers who claim their benefits early:
- Your benefit will be permanently reduced at 6.67% per year (about 0.56% per month) for claiming up to 36 months before reaching full retirement age. For example, if your full retirement age is 67 and you start collecting benefits at 65, you’ll have a 13.3% reduction.
- Beyond 36 months early, your benefit will be reduced by 20% plus 5% per year (about 0.42% per month), until as early as age 62. If you’re in the roughly one-third of Americans who start collecting benefits as early as possible, your benefit will be permanently reduced by 30% compared to what it would be if you waited until full retirement age.
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Conversely, if you wait until after full retirement age to start collecting, your benefit will be permanently increased by 8% for every year (0.67% for every month) you wait – until as late as age 70. So, if your full retirement age is 67, this means you can get a 24% boost to your monthly Social Security benefit for waiting as long as possible.
What could waiting mean to your check?
Let’s say that you were born in 1965 and, based on your work history, the Social Security Administration (SSA) estimates that you will receive $2,000 per month from Social Security if you wait until full retirement age to start collecting. (If you want an estimate based on your work record, you can view your Social Security statement on SSA.gov.)
Here’s how choosing to claim Social Security at various ages would affect your initial monthly checks:
There are a few things to notice here. First, you’d get almost $500 more each month if you can wait an extra three years to start collecting benefits after reaching full retirement age. Second, the difference between claiming Social Security at ages 62 and 70 is massive. In fact, someone who waits until 70 would get 77% more than someone who claimed at age 62 with the exact same earnings history. And finally, you don’t necessarily need to wait until 70 to have a meaningful difference. As you can see, even waiting an extra year or two can make a big difference in your income.
Is waiting to claim Social Security a good idea for you?
Of course, $2,480 per month is better than $1,400 per month, all things being equal. But like any financial decision, there are many things to consider, and waiting until age 70 isn’t the right move for everyone. For example, maybe health issues force you to retire earlier than you planned and you need the income sooner. The bottom line is that if you can hold off on Social Security, it can significantly increase your retirement income. But there are several factors to consider when determining your ideal retirement age, and it isn’t a decision to be taken lightly. This article could help you figure out when to start claiming benefits.
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