Knowing when to take Social Security is a high-stakes question for retirees. On the one hand, retirees are often advised to wait as long as possible to maximize their monthly payments. On the other hand, waiting to claim Social Security benefits doesn’t make sense for everyone.
Aging into Social Security Retirement Benefits
Many people consider 65 to be the standard age for retirement. It’s also when people age into Medicare. However, in terms of Social Security retirement benefits, there’s nothing magical about a person’s 65th birthday.
You can start claiming your Social Security retirement benefits as early as age 62. You might think it makes sense to claim benefits as soon as possible – but there’s a catch. If you claim before you reach full retirement age, your benefits will be reduced for your entire retirement.
The age at which you reach full retirement depends on the year you were born:
- 1943 to 1954: 66
- 1955: 66 and 2 months
- 1956: 66 and 4 months
- 1957: 66 and 6 months
- 1958: 66 and 8 months
- 1959: 66 and 10 months
- 1960 and later: 67
If you were born on January 1, refer to the previous year for your full retirement age.
Maximizing Social Security Benefits by Waiting
Waiting until full retirement age makes a huge difference. The Social Security Administration says if you turn 62 in 2025 and start claiming benefits immediately, your benefit will be about 30% lower than it would be if you waited until you turned 67 to claim benefits.
Furthermore, if you delay benefits beyond your full retirement age, you will receive delayed retirement credits that increase your benefits even more. The Social Security Administration says your retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond your full retirement age. For people born in 1943 or later, the monthly rate increase is two-thirds of 1%, or 8% for a 12-month increase. It’s important to note that the benefit increase stops when you turn 70.
This means you can claim as early as age 62, but you will receive significantly larger benefits if you wait until age 70. Over the course of a long retirement, this means you may receive more money in total by delaying benefits until you turn 70. However, waiting doesn’t always make sense. There are three situations in which it makes sense to claim benefits as early as possible.
1. You need your benefits now.
Some retirees don’t have the luxury of waiting. Many people are forced to retire earlier than planned. They may have health problems that make work impossible or may need to spend their time acting as an unpaid caregiver for a loved one. Workers who are laid off near retirement age may also have a hard time finding a new position. It’s illegal to discriminate against older workers, but, according to USA Today, this appears to be a common problem.
If you can’t work and need income, claiming Social Security benefits as early as possible may be your only option. Just make sure you consider other possibilities first – such as part-time work as a consultant or downsizing your home.
2. Your expected life span is shorter.
The advice to delay claiming Social Security benefits hinges on the assumption that a person will have a long life, meaning the increase in benefits will eventually make up for the lost checks in the early years of retirement. However, this is not the case for people with shorter life spans.
According to the CDC, the average life expectancy is 77.5 years. Men tend to have shorter lives, with an average life expectancy of 74.8 years, whereas women have an average life expectancy of 80.2 years. Additionally, once you make it to retirement age, your life expectancy increases. Use the Social Security Administration Life Expectancy Calculator to see your expected life expectancy based on your current age.
Bear in mind, this calculator doesn’t take your medical history into account. If you expect to have a shorter life span due to your health problems, it may make sense to claim Social Security benefits early.
3. It makes financial sense in your situation.
Everyone’s personal situation is different. For example, you may be expecting a new source of income in the future, such as a spouse’s pension, meaning you’ll be financially secure in the future but you could use some additional income now.
It’s also important to consider Social Security rules for spousal benefits. You can claim a spousal benefit of up to one-half of your spouse’s full retirement age benefit, but only if your spouse is already receiving benefits. Your spouse may decide to claim benefits early, even though it means a reduction in his or her benefits, allowing you to start claiming the spousal benefits as early as possible.
When Should You Claim Social Security Benefits?
There’s a lot to think about – and a lot of numbers to crunch – before you can decide when to claim Social Security retirement benefits. Although people are often encouraged to wait, a different strategy may make sense in your personal situation. If you’re unsure, talk to a financial advisor before making a decision.
One final warning: even if you delay claiming Social Security, you may need to enroll in Medicare when you turn 65 to avoid Medicare’s late enrollment penalties.
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