When should you claim your Social Security benefits? The best time to file depends on the year you were born, your employment circumstances, and your financial goals. There’s no one-size-fits-all answer for when you should start collecting Social Security, but we’re here to go over the most important factors to consider. This advice could help you stress less during the years ahead.
Social Security Retirement Age
As of 2019, 9/10 people age 65 and older receive Social Security benefits, but the age at which each individual decides to start receiving benefits varies from person to person.
At what age can you collect Social Security?
Most people choose to wait until their “full retirement age” before they begin to claim their benefits, although you may claim Social Security as early as 62 and as late as 70 years old. The federal Social Security Administration (SSA) establishes the full retirement age (also called “the normal retirement age”), which is the age a person must reach in order to become entitled to their full retirement benefits.
As life expectancy rates have continued to rise, so too has the Social Security retirement age. Americans now live longer and are correspondingly expected to work more years before accessing the Social Security fund they’ve contributed to throughout their employment history.
(Note: You must work at least 10 years, the minimum time required to reach the mandatory 40 lifetime credits, to be eligible for Social Security.)
You can see in the chart above that the Social Security retirement age increases by the worker’s year of birth. Workers who were born in 1943-1954 may retire at age 66 and receive their benefits in the full amount. After 1954, this age gradually increases until it reaches age 67 for workers born in 1960 and later.
Can I collect Social Security at age 66 and work full time?
Yes. For many people, personal savings, financial investments, and Social Security benefits do not provide enough to live comfortably during retirement. In order to improve their quality of life—or simply just to stay active and involved with the workforce—many people choose to keep their job or take new ones after filing for Social Security.
This can be a smart move; with a high enough salary, it may be possible to increase one’s lifetime earnings average, thereby increasing retirement benefits for years to come. If you work, and you are full retirement age or older, you may keep all your Social Security benefits, no matter how much income you earn.
Social Security Early Retirement
Although the Social Security retirement age is between 65 and 67, you’re allowed to claim benefits as young as 62—but you will receive a smaller monthly payment for doing so. According to the SSA, the penalty for early retirement reduces a benefit by 5/9 of 1 percent for each month before the actual Social Security retirement age for up to 36 months. If the number of months in early retirement exceeds 36 months, the benefit is further reduced by 5/12 of 1 percent per month.
For example, if a worker retires at age 62 but the normal Social Security retirement age is 67, the maximum number of reduction months would be 60 (12 months x 5 years). That would mean 36 months x 5/9 of 1 percent plus 24 months times 5/12 of 1 percent. In total, the benefit would be reduced by 30 percent, which is substantial considering that Social Security is one of the most important sources of income during retirement.
It may be tempting to access your benefits early, but you need to calculate what you would get and what you would give up depending on how long you may live. It might be in your best interest to avoid early retirement if you can continue working and you think you will likely live for many more years. Alternatively, you can learn how a reverse mortgage works to allow you to use some of the equity in your home to support your retirement goals and timing. An early retirement penalty could reduce your monthly retirement payment by up to 30 percent for the rest of your life.
Can you collect Social Security at age 62 and still work?
Yes, but you should be aware of how this could affect your Social Security check as there is a limit on your Social Security benefits when you are earning other income. When explaining how work affects your benefits, the SSA states that if you’re younger than the retirement age for all of 2019, they must deduct $1 from your benefits for every $2 earned above $17,640. If you reach full retirement age during 2019, the SSA must deduct $1 from your benefits for each $3 you earn above $46,920 until the month you reach full retirement age.
Social Security Delayed Retirement
If you can delay filing for Social Security, you should consider it. The SSA designed delayed retirement credits to those who choose to wait past their full retirement age to claim Social Security benefits. Your birth year and the number of months you postpone benefits determines the amount your benefit can increase.
Not sure what this means for you? The SSA offers free retirement benefits planning with a calculator to compare taking Social Security at 66 or 70.
Note: If you do decide to delay your Social Security payments, be sure to still sign up for Medicare at age 65. In some circumstances, your Medicare coverage may be delayed and cost more if you do not sign up in a timely manner.
What is the maximum Social Security benefit at age 70?
The benefit increase for delayed retirement no longer applies once you reach age 70, even if you continue to postpone filing. The maximum Social Security benefit you will receive depends on the year you were born and your full retirement age. For example, if you were born between 1943 and 1956 and your full retirement age is 66, then at age 70, you will receive your full retirement benefit plus a 32 percent bonus for waiting.
When to Collect Social Security
When you should start collecting Social Security depends on several important factors:
- The year you were born. Depending on your birthday and the corresponding full retirement age, you should delay accessing your benefits if possible in order to avoid the early retirement penalty.
- Your occupation and desire/ability to continue working. If you plan to continue working during your retirement, you should consider living off your employment income to avoid tapping into your Social Security benefits. Generally speaking, the longer you work, the more financially stable your retirement will be.
- Your marital status. Historically speaking, married women tend to outlive their husbands, which is why some married couples choose to have the husband delay retirement until he can receive the maximum payment at age 70. That way, the wife may claim his larger benefit if he passes away.
- Sources of income. If you’re wondering when to collect Social Security, tally up your sources of income beforehand. Reverse mortgages, real estate investments, and stock portfolios could all provide income that allows you to defer claiming your benefits in order to increase your Social Security benefit.
- Your financial situation. At age 62, low earners might find they need additional income to support their needs. In this case, filing early for Social Security may be the only option. However, it’s critical to compare the smaller payment you would receive in an early retirement against the larger benefit you would receive if you were to delay.
- Your health and life expectancy. When workers postpone their Social Security benefits in order to receive a larger monthly check, they are betting on a longer life expectancy—but you don’t always control how long you live. For example, a worker who decides to delay benefits until 70, but dies at age 66, will have lost years of potential Social Security payments if they had started at 62. Workers with a significantly shorter life expectancy might have a better reason to collect Social Security early.
- Calculate your breakeven point. Using the above information, calculate your “breakeven point”, or the point at which the amount you would receive for claiming later equals the amount you would have received if you started early. That number will indicate the age at which your higher, delayed benefits would equal the value of benefits missed by claiming late, and this number is often used as a guide to decide when to retire.
However, it’s also worth noting the value of delaying when to start taking Social Security monthly payments as a type of insurance policy or annuity that will keep paying if you live longer than you expect. Social Security benefits end when the recipient dies, which means that even if you live to 100 and exceed your life expectancy, you’ll continue to receive benefit payments.
After running some numbers, you might find it wise to delay your Social Security benefits to enjoy larger monthly payments later. To maximize your retirement benefits for the future, while enjoying more income today, consider using some of the equity in your home. Our Reverse Mortgage Specialists are ready to answer any questions you might have and can talk you through every part of the reverse mortgage application process. Contact us today to learn how we can help you achieve The GoodLife in Retirement.