It's understandable to be eager for retirement, eager to work much less or not at all, eager to start drawing on retirement dollars. But when it comes to retirement, there can be a lot of value in delayed gratification.
Here are some reasons why you might not want to start collecting your Social Security benefits at age 62. See if they apply to you.
Image source: Getty Images.
Setting the stage
When it comes to Social Security retirement benefits, the earliest age at which most of us can claim them is 62, and most retirees do actually start collecting their payouts at 62 or 63. The decision about when to start collecting is a tricky one, though.
Before thinking about when you should claim your Social Security benefits, know that the Social Security program assigns each of us a "full retirement age" at which we can start collecting the full benefits to which we're entitled, based on our earnings history. For most of us, it's 66 or 67 or somewhere in between. The table below can help you identify your own full retirement age:
|
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.
You may be behind in saving for retirement
A key reason why many people should consider not collecting early is because they may be behind -- and perhaps very behind -- in saving for retirement. According to the 2022 Retirement Confidence Survey: 34% of workers report that the total value of their savings and investments, excluding the value of their primary home, is less than $25,000 -- and, worse, a whopping 19% (roughly 1 in 5 people) have less than $1,000 saved.
Even if you've amassed, say, $400,000, it may not be enough to support you for several decades of retirement. If you're thinking you'll rely mostly on Social Security, know that the average monthly retirement benefit was recently just $1,669, or about $20,000 annually. (Many collect somewhat more than that, and many collect less.)
Those who are behind in their saving and investing for retirement should consider working longer -- in order to collect more income that can be invested for their futures. Working longer has other benefits, too -- such as reducing the number of years in which your retirement nest egg will have to support you and perhaps letting you remain on your employer's health insurance plan for more years. (Medicare doesn't welcome you until age 65.)
You can get more out of Social Security by delaying
Keep in mind, too, that starting to collect your benefits before your full retirement age will make them smaller -- and that you can make your Social Security benefits much bigger by delaying when you start collecting them. For each year beyond your full retirement age that you delay starting to collect your benefits, they will increase by about 8%. So delaying from age 67 to 70 can make your benefits 24% bigger.
|
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.
On the other hand... claiming at 62 makes sense for some
The reasons above should be compelling for many of us. But what if you have been saving and investing effectively for a long time and have a fat retirement account, perhaps worth $1 million or more? If you can afford to retire early and collect smaller Social Security checks, it might be a good move for you.
It can also be good to start early if you have a decent chance of living a shorter-than-average life. Yes, your checks will be smaller, but you may get more out of the program, in total, than if you put off receiving checks.
Note, too, that many people simply have to start collecting early, because they end up out of the workforce early, not by their own choice. Since this could happen to any of us, it's smart to save aggressively and invest effectively, in order to have a big nest egg ready as early as possible.
There's no one-size-fits-all best time to start collecting Social Security. Think about your own circumstances, read up on Social Security, and be sure to coordinate any strategy with your spouse. For many, if not most of us, delaying the collection of benefits until well beyond age 62 is a smart move.
