FOR LAWYERS

When Should You Start Claiming Social Security Benefits?

As you approach retirement, it’s natural to wonder at what age it would be best for you to begin receiving Social Security benefits. Ultimately, this is a very personal choice that is different for everybody. It is best to make an informed decision based on your individual and family circumstances. 

In this guide, we’ll point out some information and considerations that are worth taking into account when deciding when to begin claiming Social Security benefits. 

1. Find your full retirement age

Full retirement age, also called the normal retirement age, is the age at which you are eligible to receive full Social Security benefits. Your exact full retirement age will depend on your birth year. 

Review the chart below to find the full retirement age that applies to you.

Birth year Full retirement age
1943 - 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 

2. Taking benefits early

You can begin receiving Social Security benefits as early as 62 years old. However, if you take them before your full retirement age, they will be permanently reduced by a small fraction (five-ninths of one) of a percent for each month before your full retirement age. If you begin more than 36 months before your full retirement age, the worker benefit will be further reduced by five-twelfths of one percent per month for the rest of retirement. 

The table below clarifies how much your benefit will be reduced if you take your retirement benefits at age 62 depending on your birth year.

Birth year Months between age 62 and full retirement age The retirement benefit is reduced by
1943 - 1954 48 25%
1955 50 25.83%
1956 52 26.67%
1957 54 27.5%
1958 56 28.33%
1959 58 29.17%
1960 and later 60 30%

 

Let’s review how the total retirement benefit reduction percentage is calculated. If you begin taking benefits at 62 years old and you were born after 1960, you will be receiving them for 60 additional months. 

The reduction for the first 36 months will be five-ninths of 1% times 36 = 20%. 

The additional 24 months will be reduced by five-twelfths of 1% times 24 = 10%. 

Added together, this reduces your overall monthly benefits by 30%.

3. Delaying benefits

If you delay taking your Social Security benefits until after your full retirement age, you’ll earn a delaying retirement credit. This will increase your retirement benefits by 8% per year up until age 70.

For example, if your full retirement age is 67 and you delay until 70, you will receive 8% times three = 24% higher benefits. 

Note that the adjustment made to your benefits on the basis of when you begin taking them is usually permanent. The benefits you receive for the rest of your life will be set based on this adjustment. 

In this way, delaying benefits can lead to a significant increase in monthly benefits, especially compared to taking benefits early. For example, if you are born after 1960 and delay taking benefits until age 70, you will receive 77% more per month than you would if you take benefits early at age 62. 

4. Personal considerations 

As you can see, delaying taking Social Security benefits as long as possible will help you receive more money every month. However, this is not always possible for everybody. There are several personal and familial considerations that will play into when you should or need to begin taking benefits. Some of these include:

  • Cash needs - If you have sufficient resources to meet most of your own financial needs in retirement, you will be able to delay Social Security benefits for longer. However, if you require Social Security benefits to get by, you won’t have the same option. For this reason, it may be helpful to postpone retirement until at least your full retirement age.
  • Life expectancy - Naturally, how long you expect that you will require Social Security benefits will play into your decision. If you are sick or have reason to believe you will not meet the average life expectancy, it may be worth taking benefits early. However, if you live longer than expected, delaying benefits will be beneficial. You can use Social Security’s life expectancy calculator to estimate the expected lifespan for somebody of your sex and age. Note that approximately 1 out of every 3 65-year-olds today will live until at least age 90.  
  • Marital status - Married couples must also take their spouse’s health, age, and benefits into account. If you are the higher earner in your marriage, delaying your benefits will result in higher monthly benefits for the rest of your life, as well as higher survivor protection for your spouse. Divorced and widowed people are also entitled to a percentage of their former spouse’s benefits.  
  • Employment - If you continue to work but take Social Security benefits early, it will temporarily reduce your benefit. This is until you reach your full retirement age. Note that if your benefit was reduced because you continued to work, it will be paid back to you after full retirement age. 

Making a personal choice

As this article makes clear, the choice of when to begin taking Social Security benefits is nuanced and dependent on several very personal factors. While for some people, like those who do not have the means to support themselves, cannot work, and/or do not expect to meet the life expectancy, the choice to take benefits early may be clear, for others, it isn’t as obvious what to do. Speaking to a financial planner may be the best way to make an informed, smart decision.

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