One day, you'll probably be among the tens of millions of Americans who collect Social Security (65 million, as of 2021). How much will you collect? Well, the answer to that is different for each of us, depending mostly on how much we earned in our working lives -- and also to a great degree on when we start collecting our benefits.
We can start collecting as early as age 62, and most people start collecting around age 62 or 63. There are good reasons to not do so, though -- as well as some arguments in favor of it. Here's a closer look at why you might regret claiming at 62 -- followed by a few reasons it might make sense for you.
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1. You'll end up with smaller checks
Most of us have a "full retirement age" at which we can start collecting the full benefits we're entitled to, based on our earnings history, and for most of us, it's 66 or 67. For every year before your full retirement age that you collect your benefits, they will shrink. Specifically, you'll receive about 70% to 75% of your full benefits if you start collecting at 62.
That's not ideal, but it's also not as bad as it looks -- after all, while the checks may be smaller, you'll collect many more of them, in total. For those who live an average-length life, there will be little difference in total benefits received no matter when the benefits start being delivered.
2. Claiming early might spoil a smart spousal strategy
You should consider the bigger picture, though, before deciding when to start collecting your benefits. For example, married people might get more out of Social Security by coordinating when they each start. While the two of you will enjoy two benefit checks rolling in every month, it's likely that at one point, one of you will be gone -- and then there will be only one check arriving. The rules let you collect whichever benefit is larger. So it's worth trying to make at least one of your benefit checks as big as possible.
A good way to maximize your benefits is to delay starting to collect them -- until age 70. If the spouse who has the bigger earnings delays until 70, that can greatly help out the lower-earner, if he or she is the surviving spouse in the future.
3. If you plan to keep working, your benefits may shrink
Another consideration is if you plan to keep working beyond age 62. If you start collecting Social Security then and also work, if you earn more than a certain sum, the Social Security Administration (SSA) may shrink your benefits. As it explains:
If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2022, that limit is $19,560.
In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit. In 2022, this limit on your earnings is $51,960. We only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.
That may seem terrible, but once you hit your full retirement age, the SSA will stop withholding benefits and will recalculate your benefits, factoring in what was withheld. So you will get at least some of the withheld benefits back. Still, it may be best to just not start collecting those benefits early if you plan to keep working for significantly longer.
On the other hand...
Despite the reasons above, there are some reasons why you might want to start collecting your Social Security benefits early. For example:
- You don't know how long you'll live. If you end up waiting until age 70 to collect and then pass away at age 72, you won't have gotten much out of Social Security. Think a bit about your health and how long your relatives have lived. If you stand a good chance of living a very long life, delaying as long as possible may be best.
- Maybe you can afford to retire early. Lots of people start collecting benefits early because they must. They may have lost their job or for whatever reason simply need that income as soon as possible. Many of those who can afford to delay starting to collect their benefits should delay, but if you've done a great job of saving and investing for retirement and you can afford to retire early, starting to collect early can make sense.
The decision of when to start collecting Social Security benefits will be different for most of us. Take some time to learn more and think through it all before taking any actions, so you can position yourself to get as much as possible from the program.
