Almost all American workers are eligible for Social Security benefits, and people can begin receiving monthly payments at any time between the ages of 62 and 70. For workers born in 1960 or later, the full retirement age is currently set at 67 years old, and as the phrase implies, this is the claiming age at which you will receive your full Social Security benefit based on your work history.
However, not many people are willing to wait.
Nearly 90% of eligible Americans file for Social Security at or before the full retirement age, with roughly one-third filing as early as age 62. In 2018, only 6% of women and 4% of men waited until they were 70 to begin receiving benefits. However, if you are among the few who can wait and claim later, it could have a significant impact on your financial life after retirement.
Social Security payments at various ages
Your benefit will be permanently reduced if you claim Social Security before reaching full retirement age. However, if you can wait past your full retirement age – up to the age of 70 – your benefit will be increased.
For employees who file for benefits early:
For claiming up to 36 months before reaching full retirement age, your benefit will be permanently reduced at 6.67% per year (approximately 0.56% per month). For example, if your full retirement age is 67 and you begin collecting benefits at 65, your benefits will be reduced by 13.3%.
After 36 months, your benefit will be reduced by 20% plus 5% per year (about 0.42% per month) until you reach the age of 62. If you are among the roughly one-third of Americans who begin collecting benefits as soon as possible, your benefit will be permanently reduced by 30% compared to if you waited until full retirement age.
If, on the other hand, you wait until after full retirement age to begin collecting, your benefit will be permanently increased by 8% for every year (0.67% for each month) you wait – up to the age of 70. So, if your full retirement age is 67, waiting as long as possible will result in a 24% increase in your monthly Social Security benefit.
What could it mean for your pay?
Assume you were born in 1965 and the Social Security Administration (SSA) estimates you will receive $2,000 per month from Social Security if you wait until full retirement age to begin collecting. (You can view your Social Security statement on SSA.gov if you want an estimate based on your work history.)
Here’s how claiming Social Security at different ages affects your initial monthly checks:
Calculations by the author.
There are a few things to take note of here. First, you’d get nearly $500 more per month if you could wait three years after reaching full retirement age to begin collecting benefits. Second, there is a significant difference in claiming Social Security at the ages of 62 and 70. In fact, someone who waits until the age of 70 would receive 77% more than someone who claimed at the age of 62 with the same earnings history. Finally, you don’t have to wait until you’re 70 to make a significant difference. As you can see, even waiting an extra year or two can significantly increase your income.
Is it a good idea for you to put off filing for Social Security?
All else being equal, $2,480 per month is preferable to $1,400 per month. But, as with any financial decision, there are many factors to consider, and waiting until you’re 70 isn’t for everyone. For example, perhaps health issues force you to retire sooner than planned and you require the income sooner. The bottom line is that deferring Social Security can significantly increase your retirement income. However, there are several factors to consider when deciding on your ideal retirement age, and it is not a decision to be made lightly. This article may assist you in determining when to begin claiming benefits.
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