Deciding when to start receiving Social Security retirement benefits is a highly consequential choice that can affect your financial fate. How much your monthly benefit will be is dependent upon which month you elect to start receiving payment. Benefits can be claimed from age 62; however, the longer you wait to file, the greater the amount you will eventually receive.
Claim Social Security benefits at 62
Lower payments on a monthly basis will be given if one chooses to accept Social Security retirement benefits at the age of 62. The Social Security Administration subtracts a permanent reduction varying from 20 to 30% from the full benefit amount for those retiring at this age.
For instance, consider an individual entitled to one thousand dollars at full retirement age. If that individual claimed at age 62, the benefit would be reduced to $700. This means payments would have been received for a longer time, but the reduction would be in effect for the lifetime of the claimant.
This option is best for people who:
- Need income right away for living expenses.
- Have health issues that may shorten their life expectancy.
- Have no other income that can help support their retirement.
Retiring at full retirement age (FRA):
Your full retirement age (FRA) is what the year of your birth determines. For persons born in 1960 or later, FRA is 67 years old. If you retire at this age, you will receive 100% of the benefit amount to which you are entitled through your work history and earnings.
Full retirement age would make sense as an option for:
- You want your full monthly benefit.
- You have other income sources to support you up until you attain FRA.
- You are expected to live for quite some time and would want to maximize lifetime benefits.
Postponing retirement for higher benefits:
If you postpone the entitlement of Social Security benefits beyond full retirement age, the amount of your monthly benefit would increase as a result of delayed retirement credits. For every month that passes after your full retirement age, the amount that you receive increases, and if you hold off until age 70, you receive an additional 8% per year.
Say your full retirement age benefit is $1,000 per month. If you delay until 70, this figure could rise to $1,320. Beyond age 70, there are no further benefits for delaying.
Reasons to deliberately postpone claiming benefits:
- You are in good health and expect to live longer.
- You want to enhance your lifetime Social Security benefits.
- An alternative source of income is available to you, and you do not need Social Security right away.
Forecast your Social Security benefits
The SSA provides tools that will help in estimating retirement benefits:
- My Social Security Account-this account can be opened online at SSA.gov. This gives you estimates as to the potential benefits you can receive when you reach different ages.
- Retirement age and benefit reduction- This particular resource explains how benefits are reduced, should they be claimed before full retirement age.
- Delayed retirement credits-here, you learn the increase in benefits should you delay your retirement.
Aspects to consider when choosing a retirement age
But apart from the financial benefits, there are also other aspects that should be considered:
- Health conditions – If one will suffer from any health conditions, retirement may be advised earlier.
- Life expectancy – For instance, if a person expects to live up to 80 or 90 years of age, they may consider waiting before benefits become available.
- Current employment status – If one intends to work post-retirement, eligibility to benefits may be affected due to the reduction in benefits according to income.
- Other sources of income – Pensions, Savings and other sources of retirement income will determine the best possible time for one to start claiming Social Security.
