If you take early Social Security, you start collecting retirement benefits before you reach full retirement age. That’s age 66 or 67, depending on the year you were born.
- If you’re in poor health, it might be better to start collecting your benefits sooner rather than later.
- Your benefit increases by 8% each year you wait to collect past your full retirement age, up to age 70. Savvy investors may be able to beat that.
- If you need more money now and expect your expenses to go down later, it might make sense to start benefits early.
Social Security Retirement Age
Full retirement age is when you first become eligible for full (unreduced) Social Security retirement benefits. If you were born in 1960 or later, your full retirement age is 67. If you were born before that, the age is somewhere between 65 and 66 years and 10 months, depending on your birth year.
|SOCIAL SECURITY BENEFITS BY AGE AND YEAR OF BIRTH|
|YEAR OF BIRTH||FULL RETIREMENT AGE||REDUCTION AT AGE 62|
|1937 or earlier||65||20%|
|1938||65 and 2 months||20.83%|
|1939||65 and 4 months||21.67%|
|1940||65 and 6 months||22.50%|
|1941||65 and 8 months||23.33%|
|1942||65 and 10 months||24.17%|
|1955||66 and 2 months||25.83%|
|1956||66 and 4 months||26.67%|
|1957||66 and 6 months||27.50%|
|1958||66 and 8 months||28.33%|
|1959||66 and 10 months||29.17%|
|1960 and later||67||30.00%|
You can earn “delayed retirement credits” each month that you wait to collect beyond your full retirement age, up until age 70. This increases your monthly payment by 2/3 of 1% for each month that you wait—or 8% a year.
Even though more money is usually better, that’s not always the case with collecting Social Security benefits. Here are four times it might be better to forgo the larger check and start collecting benefits sooner.
1. Your Health Is Failing
Retirement can last 20 or 30 years (or more) if you’re a healthy senior, but unfortunately, many people develop illnesses as they age. That’s why planning for healthcare costs in retirement is so important.
If you’re in poor health, you may need the extra money that Social Security benefits provide—and opt to claim benefits early. And, sadly, if you think you may not live to be very old, you could come out ahead on a lifetime basis.
2. You Think You Can Get a Better Return
You’ll get an 8% increase in your benefit each year past your full retirement age, up until you reach age 70. That means if you’re 67 and wait three years to claim benefits, your check will be 24% larger when you finally start.
3. You Need More Money in the Early Retirement Years
In the first stage of retirement, many people are healthy, have a lot of energy, and spend more money on hobbies, travel, and other entertainment. As a result, many newbie retirees need increased cash flow during the earlier years of retirement—and less as they get older.
4. You’re Afraid Social Security Will End
Social Security is one of those benefits that’s supposed to be around forever. But the system is in trouble, and benefits may change in the future. That worries people of all ages.
The Bottom Line
When to start collecting Social Security depends on each retiree’s unique situation. The longer you wait to start collecting, the larger your monthly check will be. But that doesn’t automatically mean you’ll have the highest lifetime benefits.
by Paul B. Burkhalter Managing Partner of Morgan & Weisbrod, Board Certified in Social Security Disability Law.