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Why the Age at Which You Claim Social Security Benefits Might Not Matter

By Katie Brockman – Nov 18, 2019 at 7:47AM

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File for your federal retirement benefits at 62, 67, 70, or anywhere in between -- the Social Security formula is designed to even things out for the average person.

There are a lot of opinions about what the best age is at which to claim Social Security benefits. Some experts advise waiting until age 70 so you can receive bigger checks each month, while others say it's best to claim early at 62 so you can start collecting and enjoying your benefits as soon as possible.

However, the age at which you begin taking Social Security benefits may not have as big of an impact on your retirement as you may think. In fact, it may not matter at all.

Social Security cards with a hundred dollar bill

Image source: Getty Images

How much does age really matter?

The amount you'll receive from the Social Security program each month depends largely on two things: The average amount of money you made during the highest-earning 35 years of your working life, and the age you are when you file for benefits. To receive what the government defines as your "full" benefit, you'll need to wait to claim until your full retirement age (FRA). Your FRA depends on the year you were born: For those born in 1960 or later, it's 67; for those born prior to 1960, it's either 66 or 66 plus some number of months.

You can apply for benefits as early as age 62, but the earlier the claim, the smaller the size of the checks you'll receive. If you wait until after your FRA to file, you'll receive larger amounts each month. Based on that, it might seem at first glance as if waiting longer to start collecting benefits would naturally result in you getting more money out of the program in retirement, but that's not always the case. 

The Social Security program's benefits formula was designed such that if you live to an average age, you'll end up collecting roughly the same in total benefits during your retirement regardless of when you start taking them. If you claim early, your checks will each be smaller, but you'll receive more of them. If you wait, your checks may be bigger, but you'll receive fewer of them.

To see how this plays out in practice, let's consider a hypothetical example. Say your FRA is 67, and based on your income over your career, you'd receive $1,500 per month in benefits if you file for them at that age. If you claim at 62, your checks will be reduced by 30%, leaving you with $1,050 per month. If you wait until you're 70, you'd receive 24% more per month or $1,860.

The average life expectancy in the U.S. today is 78.6 years old, according to the Centers for Disease Control and Prevention. So if you live until, say, age 80, here's what your total lifetime benefits would look like depending on what age you began claiming them: 

Lifespan Total Lifetime Benefits When Claiming at 62 Total Lifetime Benefits When Claiming at 67 Total Lifetime Benefits When Claiming at 70
80 years $226,800 $234,000  $223,200

Source: Author's calculations

In this example, you might come out slightly ahead by waiting until 67 to claim. But you'll still only receive roughly $7,000 more over a lifetime than if you filed for benefits at 62, and that small difference may not be worth the wait. Then consider the $10,800 less you'd receive by waiting until 70 to file.

When it pays to aim for a certain age

So, if your lifespan is something close to average, it may not matter much when you file for Social Security. However, if you have reason to expect you'll live significantly longer or shorter than that average, you might benefit by timing your claim accordingly.

Although nobody can predict their exact lifespan, it's worth trying to estimate it as best you can. Take an honest look at your health situation, and weigh your family's medical history as well. If you're in shape and eating right, and your relatives have a habit of living into their 90s, it's probably safe to bet you'll have a longer-than-average lifespan. In that case, it might be a good idea to delay benefits past your FRA to earn those bigger checks. In the example above, living just 30 months longer would put you at the breakeven point relative to claiming at FRA, after which each larger check puts you ahead of the game.

On the other hand, if you're battling health issues or have other reasons to think its less likely you'll reach 79, it could be wise to file early, giving yourself more time to enjoy your retirement, and your money.

Keep in mind, though, that when picking an age at which to file, there are other important considerations beyond simply maximizing the total amount of cash you extract from Social Security.

For example, if you've built a health enough nest egg to do so, you might choose to claim early and get a head start on retirement. In addition, if you're married, there are strategies you and your spouse may want to take advantage of under which one of you claims early and the other does so later.

Choosing when to start taking your Social Security benefits is a big decision, but it's not quite as important as it sometimes gets made out to be. It may not make much of a difference at all in regards to how much you receive over the course of your retirement. But the more you know, the better a decision you'll be able to make.

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