Social Security benefits in retirement are earnings-based. The more you earn during your top 35 paid working years, the higher your benefits stand to be once you're eligible to claim them.
That said, the age at which you file for benefits will impact the amount you collect in Social Security each month. If you claim benefits at full retirement age, you'll get the exact amount your earnings record entitles you to. Full retirement age is either 66, 67, or 66 and a certain number of months, depending on the year you were born.
Otherwise, you can file for benefits as early as age 62 and as late as age 70. Filing before full retirement age will reduce your benefits on a monthly basis, while filing after full retirement age will increase them. The maximum reduction you can face on the Social Security front is 30%, assuming you file at 62 with a full retirement age of 67. And the most you can boost your benefits is 32%, assuming you file at 70 with a full retirement age of 66.
Not surprisingly, 62 and 70 are popular alternatives outside of full retirement age to file for benefits. But here's another age you might consider: 65. Here's why you may want to go that route.
1. You can time your filing with Medicare
Though seniors get an eight-year window to file for Social Security, Medicare eligibility doesn't begin until age 65 unless you qualify for a health-related exception that lets you sign up earlier. The nice thing about filing for Social Security at 65 is that you can do so in conjunction with Medicare. From there, you can have your Medicare Part B premiums deducted directly from your Social Security payments, thereby saving yourself some legwork in the process.
2. You can get your money sooner than full retirement age without facing such extreme reductions
Many seniors claim benefits ahead of full retirement age not because they're impatient, but because a need for that money arises, whether it's spurred by health issues or the loss of a job. The nice thing about taking benefits at 65 is that you won't face the same reduction you'd be grappling with by filing at 62. If your full retirement age is 66, you'll only lose 6.67% of your monthly benefits by filing at 65. And if it's 67, you'll only lose 13.34%. That's a lot less than the 30% referenced above. At the same time, you'll also get your money a bit sooner than you would by waiting until full retirement age.
Should you claim Social Security at 65?
Though you might face just a modest reduction in benefits by claiming them at 65, that's still a reduction nonetheless. If you don't have much in the way of savings and expect Social Security to constitute the bulk of your retirement income, then slashing your benefits in any way could end up hurting you.
Another thing to keep in mind is that if you file for Social Security at 65 but are still working at that point, you could see some of your benefits withheld if your earnings exceed a certain threshold that changes from year to year. For 2019, it's $17,640. Once you earn more than that, you'll have $1 in Social Security withheld for every $2 of income you bring home. The only exception is if you're reaching full retirement age this year, in which case that threshold increases to $46,920. From there, you'll lose $1 in Social Security for every $3 in income.
Now the good news is that the benefits you have withheld under these circumstances aren't lost permanently. Rather, they're added back into your monthly payments once you reach full retirement age. The reduction you'll face by filing for Social Security at 65, however, will remain in effect for the rest of your life unless you manage to undo your application within a year and pay back every dollar in benefits you collected.
So what's the best move for you? It depends on your earnings status and whether you really need the money at 65. If you can wait until full retirement age or beyond, you may be better off delaying and growing your benefits. But if you have a good reason to file at 65, know that in doing so, you'll enjoy some conveniences on the Medicare front, and you won't slash your benefits to such an extreme.