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Planning to Claim Social Security at 65? Here's Why You May Need to Rethink That

By Christy Bieber – Jul 11, 2020 at 11:45AM

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Hint: Claiming at 65 could reduce your benefit!

Close to a quarter of all workers plan to retire at 65, according to recent research from the Transamerica Center for Retirement Studies. It's not surprising so many people expect to stop working at that age, as it's long been viewed as the default age to leave the working world. But if you're thinking of starting your Social Security benefits upon retiring at 65, you may need to reconsider that plan. Here's why.

65 is no longer full retirement age

One big reason why 65 is a popular age when workers plan to quit is because it used to be the age when you were entitled to your standard retirement benefit. However, that's no longer the case for any worker born after 1943, since amendments to Social Security that passed in 1983 gradually phased in a later full retirement age (FRA).  

Elderly couple sitting on bench at the beach.

Image source: Getty Images.

Full retirement age is now between 66 and 67, depending on your birth year. And if you retire even a month prior to FRA, you'll be looking at a cut to benefits thanks to early filing penalties. For those whose FRA is 66, starting Social Security benefits at 65 would result in a 6.7% cut to the standard benefit. And workers born in 1960 or later who have an FRA of 67 would be looking at a 13.4% reduction in the standard benefit if they left work at 65. For all those in the middle, the benefits cut would be somewhere in between. 

Social Security retirement benefits are one of the most ideal sources of retirement money, since they're guaranteed for life and protected against inflation. Reducing them by retiring before the Social Security rules declare you've hit FRA could be a big mistake. It's worth rethinking your plan to claim benefits at 65 in order to avoid it. 

Working until 65 may not be possible

Ideally, you should rethink claiming Social Security benefits at 65 so you can wait at least an extra year to avoid early filing penalties (and perhaps even longer to earn delayed retirement credits). Unfortunately, most people don't live in an ideal world. In fact, the more likely reason you'll end up having to rethink starting your benefits at 65 is because you'll end up needing them earlier. 

Although the majority of Americans want to work until at least 65 and sometimes longer, many current retirees indicate they were forced to leave work earlier than expected. In fact, unplanned early retirement for health or family reasons is incredibly common and one of the leading reasons that 62 is the most popular age to start Social Security. 

Sadly, if you find yourself unable to keep working into your 60s, you may not have the money to live on unless you start your benefits before age 65 -- even if claiming so early means taking a financial hit. 

Don't count on claiming your Social Security benefits at 65

Counting on claiming Social Security benefits at 65 is a bad move when setting your retirement savings goals, because there's a very real chance you could end up forced to claim your benefits early and get smaller checks. When you're making your plans for retirement, anticipate you'll get your benefits at 62, even if you want to work longer. If you're able to do so, you'll just end up with extra money -- which is a good problem to have. 

If you're still doing well and have a job in your mid-60s, you may also want to rethink claiming at 65 and wait until FRA or later. In this case, you'll be setting yourself up for a secure future by increasing the size of your checks. When you're flush with cash later in life, you'll be very happy you reconsidered your plan. 

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