Deciding what age to take Social Security retirement benefits is one of the most fundamentally important decisions that American retirees are faced with. This massive federal government program is the keystone for millions of Americans' retirement hopes and dreams.
But since the system allows workers to decide when -- between ages 62 and 70 -- they want to retire and start collecting payments, it's important to make the best decision based on your situation. Here are three great reasons why taking Social Security at age 67 may be perfect for you.
Why age 67?
It's the full retirement age, which is when you're eligible for 100% of your monthly Social Security retirement benefit for anyone born in 1960 or later. For people retiring this year, it's age 66 and will be until 2020, when full retirement age will gradually increase a couple of months each year until 2027, when it becomes 67. So, for the purposes of this article, we will assume that 67 (or 66 if you're going to retire in the next several years) is your full retirement age.
Reason 1: You're emotionally ready to retire
Being ready to retire isn't just about money. It's also about being ready to move into the next phase of your life. Here are some of the things that you'll need to have thought about and made plans for before you retire:
- Made a financial plan:
- Including calculating worst-case scenarios for how long your retirement assets will last.
- Including a budget that you've already put in place before retiring.
- Made plans for what you'll actually do after retiring.
- How will you maintain social connections?
- Where will you find purpose?
- How will you keep yourself physically and emotionally engaged?
While most people have put their financial house in order before they retire, a surprisingly small number of retirees actually have a workable plan in place for what they do, and all too often, this leads to an unsatisfying retirement. At the end of the day, there's only so much golf and fishing you can do, and like it or not, the social relationships and sense of purpose and accomplishment that most of us get from our work are something you'll need to find in your retirement, too.
Many retirees face isolation and even depression, and largely because they didn't structure a life that would fill in the gaps leaving the work world can create. For some, it can even lead to further emotional illness and substance abuse. Retirement should be a chance to pursue dreams and have purpose, not face inner nightmares.
So, even if you're financially prepared to retire sooner than 67, make sure you're emotionally ready. Not just "done working," but that you've got a plan in place to maintain a meaningful and purposeful existence when your working days are done.
Reason 2: You're claiming spousal benefits
If you plan to collect spousal benefits versus receiving Social Security based on your own work record, you can never collect more than 50% of your spouse's full benefit at their full retirement age. In other words, while your monthly benefit on your own work record continues to increase 8% for every year you delay taking Social Security up to age 70, spousal benefits are capped at 50% of your spouse's full retirement age benefit.
If you're in this situation, there's absolutely no reason to delay past age 67 since your spousal benefit won't go up. Claiming early, however, will reduce your monthly check, so waiting until age 67 will mean a bigger check each month.
This is particularly true for women, who are more likely to file on their spouse's work record than men and who also tend to live longer. Those bigger checks could make a difference later in life, especially if they mean you'll arrive in old age with more of your other retirement savings.
Reason 3: It makes sense for your finances
Social Security is a central source of retirement income for most Americans, but it's far from the only one. Furthermore, if your other retirement savings assets won't cover the gap, retiring too soon will leave you in a bind later in life when your ability to generate income is reduced.
In other words, if your Social Security payment at age 67, along with the value of your other retirement assets such as 401(k) and IRA savings, pensions, annuities, and others will provide you with sufficient income for the next 20 years or more -- including inflation -- then it's the perfect age to start collecting.