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Many Are Making a Tragic Social Security Mistake -- Are You?

By Selena Maranjian – May 13, 2019 at 4:59PM

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Don't short-change your retirement by inadvertently signing up for shrunken benefit checks.

Sometimes surveys turn up surprising findings. One, for example, found that fully 16% of respondents would rather spend a night in jail than prepare their tax return. Those are some hard-core procrastinators!

Here's another: Many people are, unknowingly, signing up to receive smaller Social Security checks than they could otherwise get. This one is terrible, because it means lots of folks are entering retirement without sufficient information to make informed decisions. Here's a quick look at what you need to know to avoid making this particular mistake.

The foot of a man in a black wingtip shoe about to step on a banana peel.

Image source: Getty Images.

Your "full retirement age"

As you might know, you can start collecting regular Social Security retirement benefits as early as age 62. That's also the most popular age to start collecting. There are plenty of good reasons to start at 62, but before you decide when you want to start, you need to understand what your "full retirement age" is.

Full retirement age is the age at which you can start collecting the full benefits to which you're entitled, given your earnings history -- and per a recent Nationwide Retirement Institute survey, fully 68% of Americans surveyed offered incorrect answers when asked what their full retirement age was. On average, they guessed that it was 63. That's actually not anyone's full retirement age.

In the past, the full retirement age was 65 for everyone, but it has been increased a bit over time, for many people. The table will show you what your full retirement age is:

Birth Year

Full Retirement Age

1937 or earlier

65

1938

65 and 2 months

1939

65 and 4 months

1940

65 and 6 months

1941

65 and 8 months

1942

65 and 10 months

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

Source: Social Security Administration. 

More or less -- of your full Social Security benefits

Here's why it's really important to understand the full-retirement-age concept: You can start collecting your full benefits at that age, but if you start collecting earlier, you'll get smaller benefit checks (and if you start later, you'll get bigger ones).

More specifically, if you start collecting early, your benefits can be up to about 30% smaller. And 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. The table below shows how much of your full benefits you'll receive if you start collecting at various ages:

Start Collecting at:

Full Retirement Age of 66 

Full Retirement Age of 67 

62

75%

70%

63

80%

75%

64

86.7%

80%

65

93.3%

86.7%

66

100%

93.3%

67

108%

100%

68

116%

108%

69

124%

116%

70

132%

124%

Source: Social Security Administration. 

The problem with the survey findings is that many people must be starting to collect their benefits at age 62 or perhaps 63 -- without realizing that they're receiving shrunken benefits.

Two red dice sit next to a torn piece of paper on which is printed "Will Your Social Security Be Enough?"

Image source: Getty Images.

Good news and bad news

Fortunately, it's not always bad to start collecting at age 62 or 63. Many people have little choice about it in the first place: If they lose a job, are in poor health, or are struggling to make ends meet, any income will be welcome, and they might as well start collecting early. If they have plenty of money, then starting early can help them launch an early retirement voluntarily, which can be very enjoyable.

Meanwhile, the whole Social Security system is designed so that those who live average-length lives will collect roughly the same total benefits no matter whether they start collecting at 62, 67, or 70. That's because starting early will give you smaller checks, but lots of them.

Starting early can also be part of a sensible strategy for married folks. Imagine, for example, that you and your spouse have had rather different earnings histories. You might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying collecting the benefits of the higher-earning spouse. That way, you get some income earlier, and when the higher earner hits 70, the couple can collect extra-large checks based on their earnings. Also, should that higher-earning spouse die first, the surviving spouse can collect that bigger benefit.

But maybe you are the spouse with the significantly higher earnings history, and you start collecting at 62 without realizing that a different plan would have been better. What if most people in your family live well into their 90s, and you could have easily delayed starting to collect until 70? Everyone's situation is different, so 62 or 63 is not the best age for everyone at which to start collecting Social Security benefits.

There's a lot to consider when you make the decision about when to start collecting, so be sure to read up on Social Security before making moves that will affect your financial security for the rest of your life.

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