Social Security provides income to millions of seniors, and once you retire, there's a good chance you'll end up counting on it as well. It's crucial that you file for benefits at the right time, because the age you claim Social Security at will dictate how much money you collect on a monthly basis for the rest of your life.
Though your benefits are calculated by taking an inflation-adjusted average of your wages during your 35 highest-paid income-earning years, that number can change based on when you file for Social Security. Here are four popular choices for claiming benefits you should know about.
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1. Age 62
Age 62 is the earliest age you're allowed to file for benefits, and not surprisingly, it's also the most popular among seniors. The upside of claiming Social Security at 62 is getting your money as soon as you're eligible. The downside, however, is that you'll face the greatest possible reduction in benefits you can be hit with.
You're not entitled to your full monthly benefit based on your work record until you reach full retirement age, which, as we'll discuss in a bit, is either 66, 67, or somewhere in between. For each month you file ahead of full retirement age, your benefits get reduced. Filing at 62 will cut your benefits by anywhere from 25% to 30%, depending on your specific full retirement age, and that reduction will remain in effect permanently unless you withdraw your benefits application within a year and repay all of the money you collect. Therefore, make sure you have a good reason to take benefits at 62 before going that route.
2. Age 65
Age 65 is when seniors become eligible for health coverage under Medicare. As such, it's also a common age to sign up for Social Security. That said, don't be fooled into thinking you have to claim Social Security to get on Medicare, because you don't. The only advantage of being on Social Security first (or simultaneously) is that you can have your Medicare premiums deducted from your benefits so you don't need to deal with paying them yourself. But if you claim benefits at 65, you'll automatically reduce them in the process (though not to the same extent as filing at 62).
3. Age 66-67
As mentioned, you're entitled to your full monthly benefit once you reach full retirement age. That age is dependent on your year of birth, as follows:
|
If You Were Born In: |
Your Full Retirement Age Is: |
|---|---|
|
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 |
67 |
DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.
Once you reach full retirement age, you can also work and collect Social Security simultaneously without having to worry about having benefits withheld. You're allowed to do both at the same time earlier, but if your earnings exceed a certain threshold, the Social Security Administration will hang onto some of your benefits and then release the difference once you reach full retirement age.
4. Age 70
Though you're entitled to your full monthly benefit between ages 66 and 67, you can delay benefits past that point and grow them in the process. For each year you hold off past full retirement age, you'll boost your benefits by 8%. This incentive runs out at age 70, however, so there's no sense in waiting past that point to claim Social Security.
Keep in mind that the Social Security Administration won't force you to sign up for benefits once you turn 70, so you'll need to be proactive about claiming them. Wait past that point, and you risk losing out on money you're entitled to.
What's the best age for you to file for Social Security?
Though the above ages are popular ones for claiming benefits, remember that you can file at any time starting at 62. To figure out when you should take benefits, ask yourself how badly you need the money and how robust your savings are going into retirement. If you're able to continue working and don't have a ton of cash socked away for your golden years, it might pay to delay Social Security as long as you can and grow your benefits. On the other hand, if you're out of a job and need money, you may have no choice but to file on the early side. And if you have loads of savings and just plain want those benefits to travel or enjoy life, then you might claim them early simply because you can.
Your health should play into your decision to file, too. Though claiming Social Security early will reduce your benefits on a monthly basis, if you don't end up living very long, you'll likely come out ahead financially in your lifetime by filing for benefits as soon as you can. On the flipside, if your health is great, filing on the later side generally makes more sense.
Clearly, there's no single right age to file for Social Security. The best you can do is understand the implications of filing at various ages, and weigh your options carefully before coming to a decision.
