For most Americans, social security benefits are a key piece of the puzzle when it comes to planning for retirement. But getting the most out of yours is as much about deciding when to start collecting as it is about fully understanding how much you’ve accumulated throughout your working life.
Among other key factors you’ll want to keep in mind, the age at which you start collecting benefits affects the size of your monthly checks. That said, the ideal age to claim Social Security Administration (SSA) benefits ultimately depends on your financial needs, long-term retirement planning goals, and health details like life expectancy. Here’s a closer look at what you need to know to make a smart decision.
Timing: Early vs. Delayed Benefits
The SSA allows people to potentially start claiming their benefits starting at 62 years of age. However, a person’s full retirement age (FRA) depends on the year they were born and is often either 66 or 67. People might also choose to defer their benefits past their FRA, up to the age of 70, to receive larger individual payments.
Taking benefits early
Claiming your SSA benefits before your FRA means accepting a deduction in your monthly payment amounts, up to 30 percent less if you decide to start collecting right at 62. However, there are multiple reasons why this might be the best choice for some:
- You need the income earlier to cover living expenses, pay down accumulated debt, etc.
- You have a life expectancy that’s shorter than average
- You plan to retire ahead of schedule and are counting on benefits as a primary source of income at that point
- You like the idea of accessing your benefits when you’re still healthier, more active, and better able to enjoy them
Delaying benefits
Assuming you can fully afford to wait, delaying benefits collection past your FRA comes attached to plenty of advantages. The most obvious one is a larger monthly payment amount. For every year past 70 that you delay collection, you can earn delayed retirement credits at an increase of roughly 8 percent per year.
People who choose to delay also enjoy increased survivor benefits for their spouse if they happen to pass away first. Here are some factors that might make delaying a solid choice for you:
- You’re in good health with a long life expectancy
- You’re still working and earning, so you don’t yet need the benefits
- You want to maximize potential survivor benefits for your spouse
Long-Term Financial Security and Retirement Income
The timing of your SSA claim isn’t an incidental choice. It factors directly into how sustainable your retirement income will actually be overall. Make sure you’re thinking beyond just monthly payment amounts and looking ahead to the larger retirement planning picture when making your decision.
For example, the impact of your timing can influence:
- How long will your accumulated savings and investments ultimately last
- Your potential ability to successfully manage unexpected expenses
- How much income will ultimately be available to your spouse or any dependents you may still have
Not sure what’s truly best for you, your family, and your unique situation? Consider meeting with a professional financial planner to discuss and evaluate your options. You can also take a look at this resource from our experts for more helpful information: Social Security Guide: What You Need to Know Before Retirement.
Understanding the breakeven point
One smart strategy for deciding when to start collecting SSA benefits involves calculating your breakeven point. Your breakeven point is the age at which the total amount you’ll receive via delaying your benefits catches up with earlier, smaller payments.
Remember, a person who waits until 70 or older to start claiming could receive significantly more per month than someone who started collecting as early as possible at 62. Here are some additional factors to consider before claiming:
- Overall health: Do you struggle with chronic conditions that might decrease your life expectancy? Or do you come from a long-lived, healthy family?
- Employment status: Do you plan to keep working past your FRA (or at least past the age of 62)?
- Retirement savings: Do you have other reliable sources of income you’ll be using to support yourself while delaying benefits?
- Marital status: Are you married? Do you still have dependents? Consider how your decision might impact their financial security and potential benefits.
- Tax implications: Don’t forget to look into the tax implications of your decision. Depending on other sources of income, up to 85 percent of your SSA income could be taxable.
Making Informed Decisions for a Secure Retirement
When it comes to something as important as SSA benefits and when to start collecting them, there’s no one-size-fits-all answer. Choosing the right age for you means fully evaluating your personal situation, retirement goals, and general priorities. Each potential decision comes attached to a tradeoff that it’s critical to understand.
Still feeling uncertain about when to claim SSA funds and how to make the right decision for you? Contact us today for a consultation. Our knowledgeable financial experts will happily help you through the process of making the best possible decisions for your future security.
