Millions of Americans rely on Social Security to make ends meet in retirement. But the decision of when you take Social Security has huge implications for how much you'll receive every month, and therefore on your standard of living in your retired years.
To help navigate the Social Security filing process to find the ideal age to take benefits, three Motley Fool contributors weighed in with different views on the pros and cons of various ages. Take a look at their arguments, and see which one you think is most compelling for your situation.
Selena Maranjian: In my view, there's really no single ideal age to begin taking Social Security benefits that's best for everyone. But there's a solid case to be made that it's smart to start collecting at age 62.
You might find that surprising, because starting before your normal, or "full" retirement age means you'll receive reduced benefits. But the Social Security Administration has pointed out that, whether you start early, on time, or late (with late starters receiving increased payouts), the total result, on average, isn't likely to be too different.
While an early start will indeed result in lower monthly checks -- often lower by 25% of what you'll get if you start at your normal retirement age -- you'll receive more of those checks. Imagine, for example, that you retire at your normal time, age 66. In that case, you will receive $1,500 per month.
By starting at age 62, however, you might instead receive $1,125. But between age 62 and 66, there are 48 months during which you will collect checks for $1,125. That amounts to $54,000 -- which can be supporting you, or which you can invest so that it grows into a fatter sum. That $54,000 will be especially meaningful if you end up living a shorter life than actuarial tables predict -- as happens, unfortunately, to some of us.
If you're thinking of waiting until age 70 to collect the maximum benefit, remember that there are eight years between 62 and 70, and 96 months. That's 96 months of $1,125 payments, for a total of $108,000. Yes, you give up larger checks by starting early; but you probably won't lose as much as you think you will.
Dan Dzombak: The ideal age to take Social Security benefits is 70. The reason that 70 is the ideal age is that, for every year you wait past your full retirement age to take Social Security benefits, your monthly benefit payments increase by 8%, to a maximum of 132% of your primary benefit amount.
Assuming a primary benefit of $1,000 a month, waiting until 70 means that, at age 70 you will have claimed $0, while people who claimed earlier will have had multiple years of receiving Social Security checks. Someone who claimed Social Security benefits at 66 will have received $48,000 by age 70, while someone who claimed at 62 will have received $72,000 by age 70.
The trade-off of higher checks for waiting to 70 versus full retirement age of 66 pays off at age 82.5.
That may seem like a long time; but based on the 2010 Social Security Administration Life Tables, 48% of males and 63% of females who reach age 62 are expected to reach age 83. Those who reach age 82.5 and waited till 70 to claim Social Security benefits will be getting the highest checks, and will have received the most in Social Security benefits compared to everyone else their age who claimed at any other time.
Not everyone can wait until 70 to take Social Security benefits; but if you expect to live far into your golden years and are in the position to do so, it would be worth your while.
Dan Caplinger: Taking Social Security at full retirement age may be the Goldilocks answer between early retirement at 62 and delayed retirement at 70; but it has its advantages over both of its alternatives. At full retirement age, which for current retirees is 66, you have a lot of flexibility in how to deal with your benefits and those of your family members.
Specifically, full retirement age is the first opportunity you have to take advantage of some promising Social Security strategies. By filing for your own benefits, but then immediately suspending them, you can allow your spouse to claim spousal benefits based on your own work history, while still allowing your own retirement benefit to earn delayed retirement credits and grow through age 70. At the same time, you're also allowed at full retirement age to file a restricted application to receive spousal benefits without triggering benefits based on your own work history. Often, this "filing as a spouse first" or FAASF strategy can lead to your essentially earning free money while you wait for the optimal conditions for both your and your spouse's benefit.
Finally, for those who are wary of waiting too long, 66 is a good middle ground between maxing out your monthly benefits at 70 and getting money as soon as possible at 62. Even if you don't want to wait, holding out until at least full retirement age can often be worth the delayed gratification.