You can claim Social Security as early as 62 years of age, and as late as 70. But only 2% of men and 4% of women actually wait until they are septagenarians to start cashing in on their benefits.
Should more people be waiting? Perhaps; in many cases, couples simply need the money ASAP to make ends meet. But there are some very legitimate reasons to wait until 70 years of age to start claiming Social Security
Let's examine three that make the most sense.
1. You need more money
One of the most important things to understand about Social Security is that the longer you wait to claim, the larger your Social Security checks become. For those born in 1954 and earlier, the full retirement age is 66. Starting with those born after that date, the retirement age will slowly be transitioning to 67. Here's what it will look like:
Full Retirement Age
|1955||66 Years 2 Months|
|1956||66 Years 4 Months|
|1957||66 Years 6 Months|
|1958||66 Years 8 Months|
|1959||66 Years 10 Months|
|1960 and Later||67 Years|
To understand how the year you were born and your age affect your Social Security check, look at the chart below. To make the data easy to understand, it assumes that the "full" retirement benefit (aka, the primary insurance amount) is $1,000 per month. Simply click the arrows at the top to change the year of birth.
Keep in mind that this isn't a no-brainer. Those who start collecting earlier will usually have larger lifetime benefits than those who wait until 70...until they are somewhere in their late 80s. That's because early filers will have years of checks cashed before late filers see the first payment show up in their account.
2. If you're still working and you like your job
My mom has been a professor for over three decades. She's up all hours of the night grading papers and preparing for class. Most people wouldn't choose that lifestyle, but she loves it. I'm pretty sure that she'll keep on teaching until they won't let her do it anymore.
If you find yourself in a similar situation, then it makes all the sense in the world to wait until 70 to claim Social Security. Not only is she bringing in enough money to make ends meet -- making such benefits unnecessary -- but if she were claiming Social Security, those benefits would likely be taxed.
For 2016, individuals earning between $25,000 and $34,000 ($32,000 and $44,000 for couples) can have up to 50% of their Social Security benefits taxed. Individuals earning over $34,000 (over $44,000 for couples) will have up to 85% of benefits taxed. By waiting until 70, you'll not only avoid those taxes, but your benefits will be higher.
3. A carefully crafted strategy with your spouse
According to data, husbands typically out-earn their wives and thus have larger Social Security checks come retirement time. They also tend to pass away before their wives. Of course, many won't fit this mold, but it represents a large swath of American couples.
When this is the case, it makes sense for the husband to try to maximize his monthly check by waiting as long as he can to file. When he passes away, his wife can then get receive the Social Security Survivors' benefit which is equal to what the husband was getting.
Typically, the wife can begin filing for benefits at 62 to help make ends meet while they wait for the husband to turn 70. Even if waiting that long isn't financially feasible, every month that a husband is able to hold off on filing acts as a life insurance policy to ensure that his wife will be taken care of after he's gone.
For more on other coordinating strategies between spouses, fellow Fool Dan Caplinger has a rundown of various situations here.
As you can see, these scenarios run the gamut -- from the warm fuzzies of continuing a career that you enjoy, to the cold, hard reality of knowing you could come up short in retirement. In any case, it's important to carefully map out what you want your retirement to look like. When to claim Social Security benefits is a key part of that map. The sooner you start examining it, the better.
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