If you were born in 1960 or later, the magic retirement age for you, in the eyes of the Social Security Administration (SSA), is 67. That's your "full" retirement age, at which time you can start receiving the full benefits due to you. But should you actually file to begin collecting at age 67? Here are three good reasons to do otherwise.
Start earlier to play it safe
Though each of us has a full retirement age based on when we were born, we don't have to start collecting Social Security checks once we hit that age. You can start as early as age 62, and it can be quite sensible to do so. After all, plenty of people don't live as long as they think they will.
If you wait until age 70 to start collecting Social Security and then pass away at age 72, you will not get much out of the program. If you start collecting as soon as you can, at age 62, you can start enjoying that income much earlier, and for longer than you otherwise would -- though your monthly checks will be smaller, by up to about 30%.
Start earlier and still break even
You might now be thinking, "Whoa! Starting early can shrink my checks by up to about 30%?" It's true, but it's actually not as terrible as it may seem. After all, your checks will be smaller, but by starting earlier, you'll receive more of them.
If you start collecting at age 62 instead of age 67, for instance, you'll collect checks for an extra five years -- that's 60 more checks than you otherwise would have received. The SSA has explained, "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between." See?
Start later and possibly collect more
Of course, not everyone will live a life of average length. Those with short lives will clearly benefit from starting to collect early, while those with extra-long lives would benefit from delaying starting to collect. You probably can't know how long you'll live, but if many of your family members have made it well into their 90s, you might want to consider starting to collect Social Security late. For every year beyond your full retirement age that you delay starting to receive benefits, you'll increase their value by about 8% -- until age 70. So delaying from age 67 to 70 can leave you with checks about 24% fatter.
Why else might you not want to start collecting Social Security benefits at age 67? Well, if you're experiencing financial difficulties, perhaps due to a job loss or a health setback, that extra income can be quite helpful. On the other hand, if you're quite comfortable financially and have no idea whether you're likely to live an average-length life or a shorter or longer one, you might want to take a chance on living a long time and delay collecting.
Think of your spouse, too, as there are lots of strategies married couples can employ in order to maximize their benefits. For example, many couples start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, the couple does get some income earlier, and when the higher earner hits 70, they can collect extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks.
It's hard to know for sure just what the best time to start collecting Social Security is. Weigh the pros and cons, and factor in your personal financial situation and preferences as you decide what makes the most sense for you. There are good reasons to not start collecting at 67, but it might still be a reasonable option for you.