People retire at all ages, but many see 65 as the ideal retirement age. That's when you become eligible for Medicare and historically, it was the age at which people could collect their full Social Security benefit. But that's not true anymore. Below, we'll look at what happened and why you may not want to claim Social Security at 65.
Full retirement age has gone up
The Social Security Administration assigns everyone a full retirement age (FRA) based on birth year. You must wait until this age if you want the full benefit you're entitled to based on your work history.
For years, the full retirement age was 65. But as people started living longer and Social Security funding concerns began to arise, the government started pushing the full retirement age back. For most of today's workers, it's somewhere between 66 and 67.
You don't have to wait until your FRA to start claiming -- you can sign up for Social Security as early as 62 -- but starting early permanently shrinks your checks. You only get 70% of your full benefit per check if you sign up at 62 and your FRA is 67. If your FRA is 66, you'll get 75% of your full benefit per check at 62.
Every month you delay benefits increases your checks slightly until you reach 70. That's when you qualify for your maximum benefit. It's 124% of your full benefit per check if your FRA is 67 or 132% if your FRA is 66.
Claiming benefits at 65 is still an option if you're interested, but there's nothing special about starting then. You could even be shortchanging yourself because you'll get smaller checks for signing up early.
How to know when to sign up for Social Security
The right time for you to sign up for Social Security comes down to your financial situation and life expectancy. If you need Social Security to help you cover your expenses, you might have to sign up at 65 or even earlier. Or you could consider delaying retirement a while longer so you can also put off Social Security until you're older.
Those who want the largest lifetime benefit possible and expect to live into their 80s or beyond are usually better off delaying benefits for as long as possible before they sign up. They'll get fewer years of checks, but each check they receive will be larger. In the long run, this leads to more money.
But if you don't expect to live long, signing up earlier could make sense. Those who don't think they'll live past their early 70s will probably get the most overall by signing up at 62.
If you're not sure when you should sign up, create a my Social Security account. Here you'll find a calculator that will tell you how much you can expect per month at various starting ages. Multiply your estimated monthly benefit by 12 to get your estimated annual benefit and then multiply this by the number of years you expect to receive checks to get your estimated lifetime benefit.
For example, if you expect a $1,500 benefit at 62 and you think you'll live until 80, multiply $1,500 by 12 to get an annual benefit of $18,000. Then, multiply this by 18 years for a lifetime benefit of $324,000.
It takes a little extra time to go through all of these steps, but it's worth the investment. Signing up at 62 or 65 just because you can could cost you tens of thousands of dollars over the course of your retirement. With careful planning, you can maximize your Social Security benefit and help your personal savings stretch even further in retirement.