When it comes to claiming Social Security, patience can be a virtue. While you can start claiming benefits as early as age 62, for every month you wait, you'll receive slightly fatter checks. And if you wait beyond your full retirement age (FRA), the age at which you'll receive 100% of the benefits you're theoretically entitled to, you'll receive an extra boost -- up to 32% more per check.
Despite the benefits of waiting, however, 62 remains the most popular age at which to start claiming Social Security benefits. In fact, 48% of women and 42% of men started taking benefits at 62, according to a study from the Center for Retirement Research at Boston College, and a full 64% of women and 53% of men claimed benefits before they reached their FRA.
Because it's possible to receive that boost in benefits by waiting, it's logical to assume that most people who claimed early might eventually regret that decision because they're potentially missing out on bigger checks.
However, according to a new article in the Journal of Aging Studies, most Social Security beneficiaries who claimed benefits early don't regret their decision, even when they know they could have received bigger checks if they had waited.
The advantages of claiming early
According to the article, researchers studied a focus group of older men and women to determine why they claimed early and whether they were satisfied with their decision. They found that the majority of the participants in the study thought that they had "made the right decision given their circumstances at the time," although some of them admitted that they would have waited longer to claim had their financial situations been different.
For some people, claiming benefits early isn't an option, but a necessity. Whether you lose your job, or health issues force you to retire early, it can be tough to make ends meet. If you're struggling to pay the bills, you may have no choice but to claim Social Security benefits as early as possible to start bringing in income.
Sometimes, though, claiming early can be smart -- if you're strategic about it. For example, if you have reason to believe that you might not live for several more decades (for instance, if you have health issues that you know will shorten your life expectancy), then claiming early might be wise.
In theory, the lifetime amount you receive in benefits should be the same regardless of when you claim. If you claim early, you'll receive more (but smaller) checks, and if you wait, you'll receive fewer (but bigger) checks. Your "break-even point," then, is the age at which your total lifetime earnings even out regardless of whether you claimed early or delayed claiming by a few years.
For example, say your full benefit amount (or the amount you would theoretically receive if you wait until your FRA to claim) is $1,300 per month -- or $15,600 per year. If your FRA is 67, your benefits will be reduced by 30% if you claim at 62 -- leaving you with $910 per month ($10,920 per year). If you wait until age 70, though, you'll receive a 24% bonus to make up for the time you weren't receiving benefits, and your monthly check would be $1,612 ($19,344 per year). Here's what your total lifetime benefits would look like:
|Age||Total Lifetime Benefits When Claiming at 62||Total Lifetime Benefits When Claiming at 67||Total Lifetime Benefits When Claiming at 70|
Calculations by author. * Includes first year of benefits.
So while you will eventually receive more money over time by waiting to claim, you'll need to live into your 80s before your lifetime benefits by claiming at 67 or 70 exceed your lifetime benefits by claiming at 62. If you have reason to believe you won't live that long, it might be smart to claim early and make the most of your money while you can.
When it's a good idea to wait
All that being said, sometimes it's better to wait a few years rather than claiming benefits as early as possible. If you're fortunate enough to have a choice in when you claim (meaning you're not forced to claim early due to financial stress), that boost in benefits can go a long way in covering bills -- especially as you age and medical expenses start creeping up.
For example, if you're expecting to live into your 80s or beyond, those bigger checks can make a major difference for expenses such as long-term care and healthcare. Of course, you can't predict exactly how long you'll live, but it's always a good idea to be prepared for anything -- a quarter of people turning 65 today can expect to live past 90, according to the Social Security Administration, and one in 10 should make it past 95.
Also, because that boost in benefits you receive by waiting is permanent, you'll be receiving bigger checks for life. So if you do live into your 90s (or even past 100), you'll continue getting those extra benefits every month for the rest of your life. That money will be especially helpful as you age, because your personal retirement savings will likely be sparse (or might have run dry years ago) by the time you reach that age.
It's also smart to delay claiming benefits as long as you can if your retirement fund isn't as robust as you'd hoped it would be, because that extra money can make up for what you don't have in your own savings. Plus, if you continue working a few more years, you're not only contributing more to your retirement fund, but you're also not draining your savings as early as you would be if you had retired and claimed benefits at 62.
If you don't absolutely need to claim benefits early, it's often a good idea to wait -- especially if you don't have any serious health issues or other reasons to believe you won't spend more than a decade or two in retirement. However, if your options are limited, the good news is that you likely won't live with years of regret if you do claim early.