Every year, many eager seniors sign up for Social Security as soon as they turn 62, while others swear they'll never claim before 70. Who's right? Well, that depends.
There isn't really a "right" time to sign up for Social Security. But if you're trying to squeeze the most out of the program, you want to choose your starting age carefully. A lot of the time, maximizing your lifetime benefit means delaying Social Security for a while. But in some situations, starting at 62 really is your best option.
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Why does it matter when you sign up for Social Security?
The size of your Social Security checks depends on two key factors: how much you earned during your working years and when you sign up. The first factor is pretty self-explanatory. If you earn more during your working years, you typically get larger Social Security checks -- as long as you're earning less than $147,000 this year. This is the maximum income subject to Social Security tax in 2022, so higher earnings won't boost your checks anymore.
The claiming-age factor isn't as simple as you might think. The government assigns everyone a full retirement age (FRA) based on their birth year. For most workers today, that's somewhere between 66 and 67. You must wait until this age if you want the full benefit you're entitled to based on your work history.
Signing up earlier is also an option, but it comes at a cost. Every month you claim benefits under your FRA shrinks your checks. If you sign up at 62, you'll get 25% smaller checks than you would have gotten if you'd waited until your FRA of 66 to apply. If your FRA is 67, you'll get 30% smaller checks by signing up right away at 62.
Delaying benefits grows your checks gradually, and this doesn't stop once you hit your FRA. You can continue delaying, and your checks will continue growing by two-thirds of 1% per month until you hit 70. For someone with an FRA of 67, their maximum benefit is 124% of their FRA benefit per month. If your FRA is 66, you can get up to 132% of your FRA benefit per month.
For this reason, it makes sense to delay benefits if you believe you're going to live into your mid-80s or beyond and can afford to do so. You'll probably get more money out of the program this way than if you signed up right away at 62. But that's not the case for everyone.
When claiming early makes sense
Life expectancy is a critical factor in determining the best time for you to sign up for benefits. If you're 62 and you have a terminal illness, there's no sense in delaying benefits until 70. You might not live that long, and if you don't, you won't have gotten anything out of the program. In that case, it absolutely makes sense to sign up right away.
But things get a little trickier for those with average life expectancies. You could start benefits at your FRA as a middle ground. Or you could try to pinpoint the starting age that will give you the largest lifetime benefit overall.
To do this, you should first create a my Social Security account. Here, you'll find a tool that can help you estimate your Social Security benefit at any age based on your work history to date. Make note of the monthly benefit amounts for a few of the ages you're considering. Then, multiply each of these by 12 to get your estimated annual benefits. Next, multiply each of your estimated annual benefits by the number of years you expect to claim to get a ballpark of your lifetime benefit.
For example, if you expect a $1,500 benefit at 62, your annual benefit would be $18,000. If you claim this sum for 20 years, you'd get $360,000 from Social Security overall.
Repeat this process for all the starting ages you're thinking about and then compare the lifetime benefits for each. Go with the one that offers you the most money overall if you can afford to wait until that age to sign up.
Review your Social Security plan every year when you look over your retirement plan, and don't be afraid to change your claiming strategy if need be. If your life expectancy or plans for retirement change, you can always choose a different starting age.
