WAITING TO CLAIM SOCIAL SECURITY WILL MAXIMIZE YOUR LIFETIME BENEFIT
- If you claim Social Security at age 62, rather than wait until your full retirement age (FRA), you can expect up to a 30% reduction in monthly benefits.
- For every year you delay claiming Social Security past your FRA up to age 70, you get an 8% increase in your benefit. So, if you can afford it, waiting could be the better option.
- Health status, longevity, and retirement lifestyle are 3 variables that can play a role in your decision when to claim your Social Security benefits.
You can start claiming Social Security benefits at 62 and it can be tempting to take the money and run as soon as you’re eligible. After all, you’ve been paying into the system for all of your working life, and you’re ready to receive your benefits.
But you will not receive 100% of your benefits unless you wait until your Full Retirement Age of 66 years and 10 months if you reach age 62 during calendar year 2021. And if you wait longer, like until age 70 years young, you can receive even more benefits.
If you start taking Social Security at age 62, rather than waiting until your full retirement age (FRA), you can expect up to a 30% reduction in monthly benefits with lesser reductions as you approach FRA, according to Fidelity Investments. FRA ranges from 66 to 67, depending on your date of birth. And your annual cost-of-living adjustment (COLA) is based on your benefit. So if you begin claiming Social Security at 62 and start with reduced benefits, your COLA-adjusted benefit will be lower too.
Wait to Claim
Health status, longevity, and retirement lifestyle are 3 key factors that can play a role in your decision when to claim your Social Security benefits. Unfortunately, you can not predict your future health status, but you can rely on the simple fact that if you claim early versus later, you will likely have lower benefits from Social Security to help fund your retirement over the next 20-30+ years.
By waiting until age 70 to claim your benefits, you could get the highest monthly benefit possible over your lifetime than if you start claiming at age 62.
And if you are married, you may be eligible to claim Social Security based on your spouse’s earnings. This may mean a significantly higher monthly payment for you if your spouse had a higher income than you during his or her prime earning years.
Basic Benefit Rules
After you reach age 62, for every year you postpone taking Social Security (up to age 70), you could receive up to 8% more in future monthly payments. Once you reach age 70, increases stop, so there is no benefit to waiting past age 70.
Members of a couple may also have the option of claiming benefits based on their own work record, or 50% of their spouse’s benefit. For couples with big differences in earnings, claiming the spousal benefit may be better than claiming your own.
Social Security payments are reliable and should generally adjust with inflation, thanks to cost-of-living increases. Because people are living longer these days, a higher stream of inflation-protected lifetime income can be very valuable.
Social Security can form the bedrock of your retirement cash flow and income plan. That’s because your benefits are inflation-protected and will last for the rest of your life. When making your choice, be sure to consider how long you may live, your financial capacity to defer benefits, and the impact it may have on you and your survivors.
References:
- https://communications.fidelity.com/pi/calculators/social-security
- https://www.fidelity.com/viewpoints/retirement/social-security-at-62
- https://www.fidelity.com/viewpoints/retirement/social-security-tips-for-couples