Choosing the right time to start receiving Social Security benefits is one of the most significant financial decisions retirees face.
While many people choose to claim their benefits at the earliest possible age of 62, waiting until a later age, particularly age 70, can result in much larger lifetime payouts. Understanding the pros and cons of each option is key to making an informed decision.
The Early Claiming Option
The Social Security Administration (SSA) allows eligible Americans to start claiming their retirement benefits as early as age 62. However, this comes with a permanent reduction in monthly payments.
Depending on your birth year, the reduction can be up to 30% less than what you would receive at full retirement age (FRA), which is either 66 or 67.
Despite this significant reduction, about 25% of Americans still choose to file for benefits at age 62. The reasons vary but often include financial struggles such as job loss, insufficient savings, or concerns about health problems.
Waiting Until Age 70
While claiming Social Security benefits at age 62 is an option, studies and experts recommend waiting if you can afford to. According to The Motley Fool, about 92% of people aged 45 to 62 would increase their lifetime benefits by waiting to claim, ideally until age 70.
This can lead to significantly larger payouts in the long run. For instance, delaying benefits until 70 instead of 62 can increase lifetime benefits by over 10% for the average worker and up to 27.4% for lower-income individuals.
In terms of monthly income, delaying your claim results in an 8% increase in benefits per year until age 70. This means someone who waits until 70 could receive payments that are approximately 24% higher than they would if they started at 62.
The Financial Impact of Waiting
The financial impact of delaying Social Security payments is especially important when considering longevity. For example, for men who live until the national average of about 83.6 years, the difference in lifetime benefits can be substantial.
A man who waits until 70 could receive $404,736 in lifetime benefits, compared to $362,880 if he started at 62. Women, who generally live longer, could see even greater differences in lifetime payouts, with the total rising to $491,040 when waiting until 70, compared to $411,600 at age 62.
Break-Even Point: When Does Waiting Make Sense?
The break-even point is the age at which the total benefits received from delaying Social Security surpass those of early claims. For most people, this occurs between ages 77 and 81.
If you live beyond this range, waiting to claim your benefits is usually the better financial choice. For individuals in good health and with a family history of longevity, delaying benefits could lead to a significantly better financial outcome in the long run.
Factors to Consider
While waiting until age 70 can be the most rewarding financial strategy, it’s not the right choice for everyone. Experts advise considering several factors before making a decision, including expected longevity, marital status, income needs, and overall retirement savings.
Those who have sufficient savings and a family history of longevity often benefit most from delaying benefits.
For married couples, there are also strategic approaches to consider. One spouse might claim early, while the other delays their benefits to optimize survivor benefits. This approach can help maximize the total lifetime Social Security income for the couple.
Deciding when to start collecting Social Security benefits is an important decision that depends on your personal financial situation and health outlook. While claiming at age 62 is an option, waiting until age 70 can result in significantly higher lifetime payouts.
Before making your decision, consider all factors, including your health, family history, and retirement savings. If you’re in good health and can afford to wait, delaying your claim could be a financially rewarding decision.
FAQs
When is the best age to start claiming Social Security benefits?
The best age to claim Social Security benefits depends on your personal situation. While you can claim as early as 62, waiting until 70 can increase your lifetime benefits by a significant amount, often by 24% more than starting at age 62.
How much more will I get if I wait until 70 to claim Social Security?
By waiting until age 70 to claim Social Security, you can increase your monthly payments by 8% per year after your full retirement age (FRA). This means if you wait until 70, your payments could be 24% higher than if you claim at 62.
What is the break-even point for delaying Social Security benefits?
The break-even point, where delaying Social Security benefits becomes financially beneficial, usually falls between ages 77 and 81. After that age, waiting to claim Social Security typically results in higher lifetime payouts.
What factors should I consider when deciding when to claim Social Security?
When deciding when to claim Social Security, consider factors such as your health, expected longevity, marital status, financial needs, and whether you have enough savings for retirement. Delaying benefits can be advantageous if you are in good health and expect to live longer than average.
How do Social Security benefits differ between men and women?
Social Security benefits tend to be higher for women who live longer than men. For example, a woman who delays claiming until age 70 can see a greater increase in lifetime benefits than a man, due to a longer life expectancy.
