You can claim Social Security as early as age 62, or you can wait until your full retirement age, which is 66 or 67 for most people. You could also opt to take benefits later, such as at age 70. While it may seem reasonable to start Social Security benefits as soon as possible, your monthly payments will be larger if you delay claiming. For each year you wait to take Social Security past your full retirement age, your benefits grow by 8%.
Here’s what to consider as you think about claiming Social Security at a later age:
— Waiting increases benefits.
— You might pay less in taxes.
— You may feel better.
— Consider reasons not to delay payments.
— Compare Social Security at age 62 vs. 67 vs. 70.
Waiting Increases Benefits
While you can start taking Social Security at 62, you won’t receive the full benefit you have earned unless you wait until your full retirement age to sign up. This is usually age 66 or 67, and you can check to see when you are eligible for full Social Security benefits. For each year you delay claiming Social Security past your full retirement age, your benefits grow by 8%. After age 70, there are no further increases for delaying your benefit.
“By waiting until you’re 70 to start drawing on Social Security, you’re essentially opting for the highest possible monthly payout for the rest of your life,” says Khwan Hathai, a certified financial therapist based in Denver and the founder of Epiphany Financial Therapy. “It’s like giving yourself a raise just by waiting.”
You can do the math to see the differences in benefits based on the age when you claim. “There are many online calculators that can help determine the amount you will receive at various ages, but I always recommend my clients go to www.ssa.gov and open an account to see the government’s estimate of what you will receive at different ages,” says Bill Waggoner, president and chief compliance officer at Stoney Creek Advisors in Rochester Hills, Michigan. “You should also receive a statement from the government updating the amounts annually.”
Having that information will help you make an informed decision. “You can also consult an expert in Social Security planning before you make your decision to help create and adjust a robust strategy that works best for you,” Waggoner says.
[Average Social Security Benefit by Age]
You Might Pay Less in Taxes
If your income is at a certain amount or higher, you could pay taxes on some of your Social Security benefits. If you file as an individual and have an income that exceeds $34,000, you can expect that some of your benefits will be taxed. The same is true for married couples with a combined income of more than $44,000. You may have to pay taxes on up to 85% of your Social Security benefit.
However, if you delay your benefits until you retire, you could be in a lower tax bracket. If you step away from work at age 66 or 67, you won’t have a salary coming in each month. If you are in a lower tax bracket when you claim, this “will lessen the amount of taxes you will have to pay on your Social Security benefits,” says Aviva Pinto, managing director at Wealthspire Advisors in New York.
[READ: 10 Ways to Reduce Taxes on Your Retirement Savings.]
You May Feel Better
This depends on your financial situation, of course. If waiting to claim Social Security will create a financial hardship, you may not feel better at all. But Hathai points out that “from a money perspective, delaying to 70 can create a sense of empowerment and security,” she says. “There’s something inherently comforting about knowing you’ve maximized a guaranteed income stream.” This could allow you to relax and enjoy retirement without financial worries.
Reasons Not to Delay Payments
Waiting to collect Social Security benefits often pays off in the long run, but there are a couple of reasons to start payments earlier:
— You may not envision a long life. Not everyone lives into their 90s and beyond. And not everyone makes it to 70. “Life is unpredictable,” Hathai says. “Health can deteriorate and personal circumstances can change. If you or your partner face health challenges, the additional money you gain from waiting may not provide the value you once thought it would. There’s a very real emotional cost to consider here, especially if you feel restricted during what are supposed to be your freedom years.”
— You can’t make the math work. Depending on your financial picture, you may not have the luxury of waiting until age 67 or 70 for a larger payout. Maybe you retire early at age 60. You might not be able to maintain your lifestyle for years or a decade without collecting your Social Security benefits.
— You might not have a job. If you lose your job or are laid off before you plan to retire, you could be short on funds. In this case, you could opt to take another job or start Social Security benefits to support yourself.
Compare Social Security at Age 62 vs. 67 vs. 70
Consider the pros and cons of claiming benefits at different ages. Here are some examples of what to expect when taking Social Security at ages 62, 67 and 70.
| 62 | 67 | 70 | |
| Pro | Early access to funds. | You receive 100% of the benefits you’ve earned. | Maximum monthly benefits, getting an 8% increase in benefits per year after full retirement age. |
| Con | Benefits are reduced by about 30% compared to full retirement age. | Smaller monthly benefit compared to waiting until age 70. | Requires waiting and potentially using other savings in the meantime. |
| Example | If your full retirement benefit is $1,500 per month at age 67, you would receive about $1,050 per month if you start at age 62. | With a full retirement benefit of $1,500 per month, you get the full amount starting at age 67. | If your full retirement benefit is $1,500 per month at age 67, you would receive about $1,860 per month if you start at age 70. |
Choosing when to start Social Security benefits often takes some thought and evaluation. Consider your health, financial situation, employment status, and retirement goals. Delaying benefits can increase your monthly payout, though in some cases, such as when you have a health condition, you may want to claim earlier.
More from U.S. News
What Happens to Social Security Benefits When You Die?
How Raising the Retirement Age Could Help or Hurt Seniors
What to Know About the Bill to Repeal Social Security Taxes
Reasons to Take Social Security Late at Age 70 originally appeared on usnews.com
Update 06/10/24: This story was published at an earlier date and has been updated with new information.
