Americans may wonder whether there’s a good reason to take Social Security at 65, when the full retirement age for most Americans is now 66 or 67, or somewhere between.
The full retirement age is when you can start claiming your full Social Security benefit, although it’s possible to start claiming a reduced benefit as early as age 62. If you wait until age 70 to begin claiming Social Security, you’ll get a larger benefit.
Many are confused about Social Security claiming ages because, for many years, 65 was the full retirement age. That changed in 1983 when the last major Social Security overhaul incrementally increased the age to 67.
Some Americans still choose to claim their benefit at 65 because that age is ingrained in their minds, says Kendall Meade, a financial planner at San Francisco-based SoFi. In addition, 65 remains the age for claiming Medicare, which adds to the confusion about 65 being the full retirement age.
“Many people choose to retire at this age because they can start claiming Medicare, and private insurance can be expensive,” she says.
Here are some situations where it may make sense to claim Social Security at the age of 65.
— You need the income.
— It aligns with your retirement plans.
— You want to take Medicare and Social Security at the same time.
— You or your spouse have health issues.
[READ: What Will the Social Security COLA Raise Be for 2024?]
You Need the Income
“A lot of people leave work long before they actually want to leave or planned to do so,” says Devin Carroll, owner of Carroll Advisory Group in Texarkana, Texas.
Carroll cites a 2016 Employee Benefit Research Institute study that found 46% of respondents were retiring before they wanted to.
In addition:
— 55% of individuals surveyed retired because of a health concern or disability.
— 24% left the workforce because their company was either downsizing or going away completely.
— 17% of respondents were leaving work to care for a spouse or some other family member.
Those are situations where a person may need the extra Social Security income at age 65, before he or she reaches full retirement age.
It Aligns With Your Retirement Plans
If you are already planning to retire at 65, it may make sense to take the benefit at that age.
“Many folks have a traditional view of retirement and have always envisioned retiring at 65,” says Andrew Latham, a certified financial planner and director of content at SuperMoney.com. In those cases, he says, retirees align the start of their Social Security benefits with this milestone to ensure a smooth transition from employment.
Some people may want to align their retirement age with Social Security and need the additional money to maintain a similar lifestyle, says Louis Czerwinski, financial advisor at Allegiant Wealth Management in Wallingford, Connecticut.
“It is worth noting, however, that waiting to claim Social Security past your full retirement age entitles you to an increase in your benefits for every year you delay,” he adds.
[READ: 5 Reasons to Claim Social Security at Age 70.]
You Want to Take Medicare and Social Security at the Same Time
Medicare eligibility begins at age 65, which may create a natural convergence with Social Security, Czerwinski says.
“For some people, it may feel like something they should be doing at the same time, like booking your flight and hotel for a vacation simultaneously,” he says.
However, people should be cognizant of the benefit of delaying Social Security, even as they are required to file for Medicare at age 65. There’s no requirement to file for both at the same time.
“Choosing to retire and take Social Security at 65 because it is associated with signing up for Medicare could be a viable strategy,” says Brian Kuhn, senior vice president and financial advisor at Wealth Enhancement Group in Fulton, Maryland.
“If you have enough saved and are concerned about alternative health insurance options, then waiting until 65, but not beyond it, is a logical strategy,” Kuhn says.
That means taking Social Security benefits sooner than recommended, but it may also mean having a more relaxed and less stressful retirement.
“If you are fortunate enough to have a pension, their plan rules or estimates likely communicated an age 65 start date as well, so you grew accustomed to that date,” Kuhn adds. Health savings accounts also allow distributions for expenses other than health care without a penalty at age 65.
You or Your Spouse Have Health Issues
Single retirees with health challenges may want to use a simple breakeven analysis, Carroll says. “This calculation compares what you’ll receive in cumulative lifetime benefits for filing at various ages,” he says.
For example, if you’re trying to compare filing at 62 versus what you’d receive if you filed at 67, a breakeven analysis would show that you need to live longer than age 78 for filing at 67 to make more sense than filing at age 62, he explains.
“You can run all sorts of age combinations in these calculations, but if you’re single and have health issues, this is probably where filing early makes the most sense because you’re not worried about increasing survivor benefits or the host of other factors that married individuals have to worry about,” he adds.
Married couples may also benefit from a strategy of claiming at 65 in some situations. For example, the higher earner in a couple will have a higher Social Security benefit.
“If that’s the case, there’s not much reason to delay your benefit for years down the road just so you can get a higher benefit for the rest of your life, because you’ll most likely start getting that survivor’s benefit at some point in the future,” Carroll says.
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Reasons to Take Social Security at Age 65 originally appeared on usnews.com
