Social Security provides valuable retirement income in retirement, but you might be surprised by how little you're going to get if you claim early at age 62. If you want to get the most out of Social Security, waiting for even a few years longer really pays off.
Really? That little?
Social Security income in retirement isn't very high, and if you claim early, it's painfully little. The average retiring worker awarded Social Security in September 2017 will only haul in $1,234 per month in benefits, or $14,808 per year, and the average 62-year-old is collecting only $1,077 per month in 2017, or $12,924.
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That's far from enough money to support most retirement lifestyles, given that the average retired couple over age 65 is spending over $45,000 per year.
In fact, for many Americans, Social Security income is grossly inadequate. Social Security itself reports that 50% of married couples and 71% of single retirees rely on Social Security for 50% or more of their income. A whopping 23% of married couples and roughly 43% of single retirees count on it for 90% or more of their income.
Waiting even a few years can be wise
There are plenty of good reasons to take Social Security early, but if your health is good and you can stand the daily grind of working a few years longer, waiting makes financial sense.
Social Security reduces the amount you receive in benefits by a fixed amount for every month you claim before full retirement age (FRA), or the age at which you can receive 100% of your benefit amount. People turning 62 this year have a full retirement age of 66 and four months and as a result, claiming benefits at age 62 will mean you only receive 73 1/3% of their full benefit amount. Ouch.
Here's a look at how the percentages of benefits payable breaks down from ages 62 through 67 and at age 70.
| Birth Year | FRA | Delayed Retirement Credit per Year | Amount of Benefit at Age: 62 | 63 | 64 | 65 | 66 | 67 | 70 |
|---|---|---|---|---|---|---|---|---|---|
| 1943-54 | 66 | 8% | 75% | 80% | 86 2⁄3% |
93 1⁄3% |
100% | 108% | 132% |
| 1955 | 66, 2 mo. | 8% | 74 1⁄6% |
79 1⁄6% |
85 5⁄9% |
92 2⁄9% |
98 8⁄9% |
106 2⁄3% |
130 2⁄3% |
| 1956 | 66, 4 mo. | 8% | 73 1⁄3% |
78 1⁄3% |
84 4⁄9% |
91 1⁄9% |
97 7⁄9% |
105 1⁄3% |
129 1⁄3% |
| 1957 | 66, 6 mo. | 8% | 72 1⁄2% |
77 1⁄2% |
83 1⁄3% |
90% | 96 2⁄3% |
104% | 128% |
If you wait until age 65 to claim, however, you can get 91 1/9% of your full retirement age benefit. Waiting just three more years nets you thousands of dollars more in annual benefits.
For example, let's assume for simplicity's sake that your full retirement age benefit is $1,000 per month and your full retirement age is 66 years and four months. If you claim at age 62, you'd only collect $733.30 per month or $8,799.60 per year. If you wait until age 65, you'd receive $911.1 per month or $10,933 per year. The extra few years of waiting increases your annual income by $2,133 and let's face it, that extra money can go a long way toward covering an unexpected bill in retirement.
The additional money can significantly increase your lifetime haul in Social Security income too. The total amount in Social Security benefits you'll receive if you wait until age 65 will overtake your total benefits received if you claim at age 62 when you reach age 77. Live longer than that and you're going to come out ahead.
Something else to consider
You should know that there's another benefit to waiting for even a few more years to claim Social Security benefits than age 62. Social Security bases your full retirement benefit on your highest 35 years of work history. If you have less than 35 years of history, it uses zeros in its calculation. If your income is higher now than it was early in your career or if you have fewer than 35 years of work history, removing those low income or zero income years for your calculation can give your total benefit amount a nudge higher.
