Deciding when to start taking Social Security benefits is one of the most important financial decisions retirees face. The age at which you begin claiming your benefits can significantly impact your monthly payments and overall retirement income. While there’s no one-size-fits-all answer, understanding the factors that influence your decision can help you make the right choice for your financial future.
Full Retirement Age vs. Early Claiming: What’s the Difference?
Before diving into the best age to claim Social Security, it’s important to understand two key concepts: Full Retirement Age (FRA) and Early Retirement.
- Full Retirement Age (FRA): FRA is the age at which you are eligible to receive your full Social Security benefits, without any reduction. FRA varies depending on your birth year:
- For those born between 1943 and 1954, FRA is 66.
- For those born between 1955 and 1959, FRA increases by two months for each year (for example, 66 years and 2 months for those born in 1955).
- For those born in 1960 or later, FRA is 67.
- Early Claiming (Age 62): You can begin claiming Social Security as early as age 62, but your monthly benefits will be permanently reduced. The earlier you start, the larger the reduction. Claiming at 62 typically results in a 25-30% reduction in monthly benefits compared to waiting until FRA.
Factors to Consider When Deciding When to Claim
Several factors influence the optimal time to claim Social Security, and they often depend on your unique circumstances. Let’s take a look at the most important ones:
1. Your Financial Needs
- Immediate Financial Needs: If you are in urgent need of retirement income, you may want to consider claiming Social Security early at 62. While this will reduce your monthly payment, it may provide necessary funds until other retirement savings, such as pensions or personal savings, become accessible.
- Delay for Larger Payments: If you have the flexibility to wait and do not need immediate income, delaying your claim can result in a larger monthly benefit. For each year you delay claiming past your FRA (up to age 70), your benefits increase by 8% annually. This can significantly boost your retirement income over time.
2. Health and Life Expectancy
Your health and expected lifespan should play a significant role in your decision. If you’re in poor health or have a family history of shorter life expectancies, taking Social Security benefits earlier might make sense. On the other hand, if you’re in good health and anticipate living into your 80s or beyond, delaying your claim can result in greater lifetime benefits.
- Claiming Early: If you start claiming at 62 and your life expectancy is shorter, the reduction in benefits may not matter much in the long term.
- Delaying to Maximize Benefits: If you expect to live longer, waiting until 70 could provide a higher monthly benefit, giving you more money for each year you live into retirement.
3. Your Work Plans
- Still Working After 62: If you plan to continue working after claiming Social Security, it’s important to note that earning income can affect your benefits. If you claim before reaching FRA and your income exceeds a certain threshold, you may have some of your benefits withheld.
- In 2024, if you’re under FRA, the Social Security Administration will withhold $1 in benefits for every $2 you earn above $21,240.
- In the year you reach FRA, $1 is withheld for every $3 you earn over $56,520 (but only for income earned before reaching FRA).
If you are planning to continue working, it might make sense to delay your benefits until you’re no longer earning income, to avoid this penalty and maximize your payments.
4. Spousal Benefits and Family Dynamics
- Spousal Benefits: If you are married, you may be eligible for a spousal benefit, which is worth up to 50% of your spouse’s FRA benefit. This can be an important consideration if your spouse has a higher earnings history than you. Waiting until your FRA to claim benefits allows you to claim the maximum spousal amount.
- Survivor Benefits: If you are the higher-earning spouse, delaying your Social Security benefits can also increase the amount of survivor benefits your spouse would receive if you pass away. Survivor benefits are based on the higher of the two spouse’s benefit amounts, so maximizing your benefit could provide more financial security for your spouse in the future.
5. Your Retirement Savings and Investments
If you have substantial retirement savings or other investments, you might be able to afford to delay your Social Security claim. You can use your personal savings or other sources of income to support yourself until your Social Security benefits grow by 8% per year. Delaying could make sense if your investments are doing well, and you want to maximize the long-term value of your benefits.
Best Ages to Claim Based on Different Scenarios
- Age 62: Best for those in poor health, with urgent financial needs, or who may not live long enough to make delaying worth it.
- Full Retirement Age (66 or 67): A good middle ground for those who want to avoid penalties but don’t mind slightly reduced benefits. This age offers the full benefits without reductions, but waiting longer may still yield higher payouts.
- Age 70: The best option for maximizing monthly benefits for those who are in good health, have substantial other retirement income, and can afford to wait. The 8% annual increase makes a significant difference for those who can delay.
Conclusion
The age at which you start taking Social Security benefits depends on your financial situation, health, work plans, and life expectancy. While the option to claim early at 62 is available, waiting until Full Retirement Age (66 or 67) or even age 70 can provide larger, long-term benefits. It’s essential to weigh all of these factors and consider consulting a financial advisor to make the decision that best fits your unique retirement plan.
FAQs
1. Can I claim Social Security at 62 and still work?
Yes, you can claim Social Security at 62 while continuing to work. However, your benefits may be reduced if your income exceeds certain thresholds until you reach Full Retirement Age (FRA).
2. What happens if I delay Social Security until age 70?
If you delay claiming Social Security until age 70, your benefits increase by 8% each year past your FRA, which can significantly boost your monthly payment.
3. What is Full Retirement Age (FRA)?
Full Retirement Age (FRA) is the age at which you are eligible to receive your full, unreduced Social Security benefits. It ranges from 66 to 67, depending on your birth year.
4. Is it better to take Social Security early or wait?
If you are in good health and can afford to delay, waiting until age 70 may provide larger monthly payments. However, if you have health concerns or need income sooner, taking Social Security at 62 might be better.
5. Can I switch from early Social Security to full benefits later?
No, once you start claiming Social Security, you cannot switch to full benefits if you begin taking them early. If you claim early, your benefits are permanently reduced.