I've written dozens of articles about Social Security over the past year, and along the way I've created a large number of charts to illustrate one aspect of the topic or another. With this in mind, I thought it'd be interesting to share three of the more informative charts together in one place.
The first is probably one you've seen before. It illustrates the relationship between the size of your monthly benefits in relation to your primary insurance amount, and when you elect to take them.
Choosing to take them at age 62 (the earliest possible time) as opposed to 66 (the prevailing full retirement age), or even 70 (after which you no longer get credit for deferring), can make a big difference in your monthly check.
Because of early benefit reductions before 66, your actual benefits get progressively smaller the earlier you elect to receive them. On the flipside, every year you defer after reaching full retirement will boost your benefits by 8%.
The second figure expands on this by illustrating the cumulative surplus or deficit associated with taking benefits immediately after turning 62, as opposed to waiting until full retirement at 66.
In official retirement jargon, this is known as a breakeven analysis. Before turning 77, your cumulative benefits are greater if you begin receiving them at 62. This is because you've received checks -- albeit smaller ones -- for four more years than had you waited until your 66th birthday.
The relationship inverts once you turn 78. After that, the larger checks you get as a result of waiting outpace the smaller but more numerous checks associated with claiming benefits early. And as you can see, the extra money you receive by waiting until full retirement age rises quickly as time goes on.
Last but not least, the third figure shows the percentage of men and women who choose to claim Social Security benefits at age 62. Although it may not be obvious from the chart, this remains the most prevalent age at which retirees begin claiming benefits.
There are a variety of reasons for this. If people aren't optimistic about their life expectancy, then it's prudent to take benefits sooner rather than later. Additionally, if you're employed in a physically or emotionally demanding job, then applying for Social Security could be the best way to extract yourself from that environment.
Of course, at the end of the day, the decision of when to apply for benefits is deeply personal and based on your own particular set of facts and circumstances. Nevertheless, figures like these can help steer you in the best direction.
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