Deciding when to start taking Social Security benefits is one of the most important financial decisions you’ll make as you approach retirement. With the option to begin claiming as early as age 62 or as late as age 70, each choice comes with its own set of pros and cons that can significantly impact your financial future. While some may need to begin drawing benefits early to cover expenses, others may choose to wait in order to maximize their monthly payments. Understanding how your decision affects your long-term retirement income is crucial.
In this article, we’ll explore the key factors that influence the best time to start taking Social Security. We’ll break down the pros and cons of claiming benefits at age 62, waiting until full retirement age, and delaying until age 70. Additionally, we’ll discuss how your health, life expectancy, and even spousal benefits play a role in determining the optimal age for you to claim. By weighing these considerations, you’ll be better equipped to make an informed decision that aligns with your retirement goals.
Taking Social Security at Age 62: Pros and Cons
Many people choose to start taking Social Security as soon as they become eligible at age 62, and for good reason. One of the primary advantages is the immediate access to income, which can be especially helpful for those who retire early or need financial support to cover expenses. If your savings or pension are not enough to sustain your lifestyle, starting benefits at 62 can provide much-needed relief. Additionally, for individuals who are concerned about their health or do not expect to live into their late 70s or 80s, it might make sense to begin collecting sooner to maximize the number of payments received during their lifetime.
However, there are significant downsides to consider. Claiming Social Security at age 62 results in a permanent reduction in your monthly benefit, typically by about 25-30% depending on your birth year. This reduction lasts for the rest of your life, which can add up to a substantial financial loss over time. For those with a longer life expectancy, this decision could mean missing out on thousands of dollars in benefits. It’s important to weigh the immediate need for income against the potential long-term impact on your retirement security before making the choice to claim early.
Waiting Until Full Retirement Age (FRA)
Full Retirement Age (FRA) is the point at which you can claim Social Security and receive 100% of the benefit you are entitled to. For most people today, FRA is between 66 and 67, depending on your birth year. One of the biggest advantages of waiting until FRA is that your monthly benefit will not be reduced, allowing you to maximize your income without penalties. If you’re able to cover your living expenses with other income sources, delaying benefits until FRA can provide you with more financial flexibility in your later years, ensuring a steady stream of full benefits for as long as you live.
However, the downside is that you’ll need to wait several years longer to begin receiving benefits, which may not be realistic for everyone. For example, those who rely heavily on Social Security as their primary source of retirement income may find it difficult to delay benefits if they retire before reaching FRA. According to the Social Security Administration, waiting until FRA results in an average benefit of $3,627 per month in 2023, compared to $2,572 if claimed at age 62 [1]. This difference could have a significant impact on your overall financial security, making it worth considering whether you can afford to delay benefits.
Delaying Benefits Until Age 70: Pros and Cons
For those who can afford to wait, delaying Social Security benefits until age 70 can significantly increase the amount of money you receive each month. Every year you postpone claiming after your full retirement age, your benefits increase by approximately 8%. This delayed retirement credit allows you to maximize your Social Security payments, resulting in a higher monthly income for the rest of your life. For individuals with a long life expectancy or a solid financial plan in place, this strategy can lead to greater financial security during the later years of retirement when healthcare and other expenses may increase.
On the flip side, delaying benefits until age 70 means you forgo receiving payments for several years, which may not be feasible for everyone. If you’re in poor health or need additional income in your early retirement years, waiting may not be the best option. Moreover, if you pass away before reaping the full advantage of these increased payments, you might leave behind less financial support for your family or spouse. As with any financial decision, delaying Social Security should be carefully weighed against your overall retirement needs and personal circumstances.
How Health and Life Expectancy Affect the Decision
Health and life expectancy are critical factors when deciding when to start taking Social Security benefits. If you are in good health and expect to live a long life, delaying benefits might be more advantageous because you’ll receive higher payments for a longer period. For example, a person who lives into their 80s or 90s will receive more total benefits by waiting until age 70, thanks to the increased monthly payments. This strategy also aligns well with people who want to ensure a higher income in the later stages of retirement when medical expenses or long-term care costs might increase.
Conversely, if you have health concerns or a family history of shorter life expectancy, it may make more sense to start benefits earlier. Beginning at age 62 allows you to collect benefits for a longer period, potentially maximizing your total lifetime benefits if you pass away earlier than expected. According to a report by the Social Security Administration, the average life expectancy for a 65-year-old today is approximately 20 more years, but individual circumstances vary widely [2]. Evaluating your personal health and family history can help you determine the best time to begin receiving Social Security.
The Impact on Spousal and Survivor Benefits
When deciding when to claim Social Security, it’s essential to consider how your choice affects not only your own benefits but also those of your spouse. If you delay taking benefits beyond full retirement age, you can increase the monthly payments your spouse may receive through spousal benefits or, later on, through survivor benefits. This can be especially beneficial if your spouse earns less or relies on your Social Security income. By waiting until age 70, for example, your spouse could receive a significantly larger benefit in the event of your death, ensuring greater financial stability for their future.
On the other hand, claiming Social Security early can reduce the benefits your spouse is entitled to. If you take benefits at 62, not only do you receive a lower monthly payment, but your spouse’s survivor benefits will also be reduced. This can result in a significant financial gap, particularly if your spouse outlives you by many years. It’s important to assess both your current needs and the potential long-term effects on your spouse before deciding when to start collecting Social Security, especially if their financial well-being depends on your benefits.
Finding the Right Time to Claim Social Security
Deciding when to start taking Social Security benefits is a deeply personal choice that depends on several factors, including your financial needs, health, and life expectancy. Starting benefits at age 62 may provide immediate income but comes with a permanent reduction in monthly payments, while waiting until full retirement age allows you to receive your full entitlement. For those who can delay until age 70, the rewards are even greater, with increased payments that last for the rest of your life. Each of these options carries its own set of advantages and disadvantages, depending on your retirement goals.
It’s also important to factor in the impact of your decision on spousal and survivor benefits, as claiming early or delaying can significantly affect your spouse’s financial future. Your health and life expectancy play a critical role in this decision as well, as those with longer life expectancies may benefit more from delaying, while those with health concerns may prioritize starting benefits earlier. By carefully weighing these considerations, you can make an informed decision that helps secure your financial future and aligns with your retirement plans.
Sources:
[1] Social Security Administration (2023), “Fact Sheet: 2023 Social Security Changes.” https://www.ssa.gov/news/press/factsheets/colafacts2023.pdf
[2] Social Security Administration (2023), “Life Expectancy for Social Security.” https://www.ssa.gov/planners/lifeexpectancy.html