Planning for retirement can feel overwhelming, especially when it comes to making decisions about when to start claiming Social Security benefits. Many people are unsure about the best time to begin taking their benefits to maximize their monthly payments. For those who rely on Social Security as a significant source of income in retirement, getting this decision right can make a big difference.
One of the most common questions is, “At what age should I begin claiming my Social Security benefits in order to maximize my payments?” The answer to this question is not set in stone and it has to do with several factors including your financial status, health, and plans for retirement.
Let’s learn how Social Security payments are determined by the age of starting to receive them, how waiting longer can lead to higher payments, and when it is best to start receiving the payments.
When Can You Start Claiming Social Security?
While you can start collecting Social Security retirement benefits at the age of 62, your benefits will be less if you start claiming before your FRA.
The full retirement age is between 66 and 67 years depending on the year of birth. The sooner you apply for benefits, the less you will receive each month for the rest of your life. However, if you postpone applying for benefits until you reach full retirement age, the amount you will receive per month will be higher.
How Your Full Retirement Age (FRA) Affects Payments
Full retirement age (FRA) is an important concept to grasp, since it determines how your Social Security benefit will be figured. FRA is the age at which you become entitled to your full, un-reduced retirement benefits. The FRA for people born between 1943 and 1954 is 66 for most individuals. For individuals born in 1960 or later, the full retirement age is 67.
If you start collecting your benefits prior to the FRA, you will receive decreased monthly benefits permanently. The reduction is dependent on the number of months you request to take the benefits early. For instance, if your FRA is 67 and you decide to claim benefits at 62, you will receive 30% less than your full benefit. This reduction is permanent, which means that you will always receive less than you would have been if you had waited.
On the other hand, if you can postpone receiving your benefit beyond your FRA, your benefit will rise by around 8% for every year you postpone receiving it up to the age of 70. These delayed retirement credits can actually result in a significant boost to your monthly Social Security benefits.
The Benefits of Waiting Until Age 70
For those who can wait to collect Social Security, the best time is to wait until the age of 70 to get much bigger checks. Every year you delay collecting your benefits beyond your full retirement age, your benefits will rise by 8%, and this is an investment on your future earnings that is quite certain to yield good returns.
For example, if your full retirement age benefit is $2,000 per month at age 67, then waiting until age 70 will increase your payment to about $2,480 per month. This means that over time, this increase can translate to tens of thousands of additional dollars during retirement and this can be a good option for people who are in good health or have other sources of income to take care of expenses in the first few years of retirement.
Nevertheless, this approach is not suitable for everyone. Some may require the income as soon as they get to the age of 62 while some may not expect to live long enough to benefit from delayed payment. One needs to consider their health, financial status, and other goals that they want to achieve in retirement before deciding if it is wise to wait until 70 years.
Maximizing Your Social Security Benefits
It is advisable to seek the services of a financial advisor or visit the Social Security Administration website to check the expected benefits. This way, a person is able to make a better decision that is in line with his or her long-term retirement plans.