If you qualify for Social Security retirement benefits -- and it's hard not to qualify, as it generally requires about 10 years of work -- you can start collecting those benefits between the ages of 62 and 70. The official start date for many of us is 67, but here are three reasons not to start collecting then.
The Social Security Administration (SSA) has assigned each of us a "full" retirement age based on our birthday:
- For those born in 1960 or later, it's 67.
- For those born in 1937 or earlier, it's 65.
- For those born between 1937 and 1960, it's somewhere in between. (The SSA offers a handy chart with more detail: For example, if you were born in 1956, your full retirement age is 66 years and 4 months.)
Why isn't there just one retirement age for everyone? Well, because the full retirement age has changed over time. It began at age 65 for everyone and was increased in 1983 to 67. That partly reflects longer lifespans for Americans, but it was also done to strengthen the Social Security system by delaying or shrinking payments to retirees. (Some Republican lawmakers are currently pushing to increase the retirement age further, to 69. Stay tuned for more news on that, or perhaps contact your representatives to let them know whether you support that idea.)
Controlling your payout
No matter what your full retirement age is, you can begin collecting as soon as age 62, though the checks will be smaller. You can also delay collecting until as late as age 70 in order to get bigger checks. Start as early as age 62 and your checks will be up to 30% smaller. Meanwhile, for every year that you delay from your normal retirement age to age 70, you'll enlarge your payments by about 8%. Delay from 67 to 70, for example, and you'll get checks that are 24% bigger.
Many people aim to start collecting at their full age of 67. Below are three poor reasons to do so.
Awful reason No. 1: To receive fatter checks because you need the money
First off, you might delay collecting for the obvious reason -- to get bigger checks -- and your motivation might be because you're financially strapped. If so, that's not the best idea. If you're financially strapped without Social Security, you might do some things that could hurt your financial health, such as racking up debt on credit cards which can soon have you spiraling deeper into debt due to steep interest rates. It might seem worth it if you're looking forward to fatter Social Security checks in a few years, but it's not. If you really need the money, consider starting to collect early. It won't result in high-interest rate debt accumulating or anything costly like that. It will instead simply mean that you begin receiving financial help -- that you paid into the system for -- early, when you need it.
Awful reason No. 2: To receive fatter checks because it's more money
You might also be aiming to collect at age 67 instead of earlier just because you'll get bigger checks. It seems obvious that a $2,000 monthly check is more desirable than a $1,400 one -- but actually, in many cases, it really isn't. That's because the Social Security system is designed so that total benefits received are about the same for those with average life spans no matter when they start collecting. Yes, starting at 62 can give you checks that are 30% smaller, but you'll get far more of them. Between age 62 and age 67, for example, there would be 60 months of checks arriving that you'd miss out on if you started collecting at age 67.
Awful reason No. 3: To get paid sooner, even though you can afford to wait
Waiting longer than age 62 -- such as until age 67 or even age 70 -- can make sense in some situations. For example, if your family tree is full of people who lived until their late 80s or well into their 90s, you'll collect more income, overall, from Social Security if you delay starting to collect as long as you can. Many people simply can't afford to wait, though -- they need the money now, perhaps due to a job loss late in life or a costly or work-limiting medical issue. If you can afford to wait, though, and you have a good chance of living a longer-than-average life, waiting can pay off. You might, for example, still be working at age 67, or you might have sufficient income from sources such as dividends and/or your spouse's income.
Everyone's situation is different, so run the numbers for yourself to see what makes the most sense for you. If you're married, be sure to coordinate your Social Security benefits. There are some strategies that married couples can use that can maximize the money they get from Social Security -- such as starting to collect 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.
The more you know about and plan for Social Security, the more you can get out of the program.