The age you begin taking Social Security will directly affect your monthly benefit amount, so choosing the right time to claim is critical.
Age 62 is the earliest you can file, and it's also the most popular -- with more than one-third of older adults taking benefits at this age, according to a 2020 survey from the Bipartisan Policy Center.
While filing for benefits as early as possible isn't always a bad idea, there are situations where you may be better off waiting. Here's why.
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The risks of claiming too early
For millions of retirees, Social Security is a primary source of income. In fact, around 40% of retirees say they rely on their benefits "completely," according to a 2022 survey from The Motley Fool.
However, the average benefit amount in 2023 is only $1,827 per month, or just under $22,000 per year. It's tough to live on that income during normal economic times, but it's even more challenging now with higher-than-average inflation.
Claiming Social Security at 62 can exacerbate that problem, because the earlier you file, the smaller your monthly checks will be.
For example, say you have a full retirement age of 67 years old, and by filing at that age, you'd collect $1,800 per month. If you were to claim at 62, your benefits would be permanently reduced by 30%, leaving you with $1,260 per month.
In other words, filing a few years early would permanently reduce your payments by $540 per month, or nearly $6,500 per year. If money will be tight in retirement, those reductions could make it far more difficult to enjoy your senior years comfortably.
When filing early may be worth it
If your goal is to maximize your monthly income, delaying benefits may be your best bet. Waiting to file until age 70 will boost your benefits by hundreds of dollars per month, which can go a long way in retirement.
That said, there are valid reasons to consider claiming early, despite the benefit reductions:
- You have plenty of retirement savings: If you're not going to be relying heavily on Social Security, it may not necessarily matter when you claim. Filing early will still result in smaller checks, but that may be a worthwhile sacrifice in order to retire earlier.
- You don't have any other option: Unfortunately, not everyone has the luxury of choosing when to retire. If you lose your job and are forced into an early retirement, claiming early can provide some extra cash so you don't have to depend entirely on your savings.
- You develop health issues: In general, the amount you collect in benefits over a lifetime should be roughly equal regardless of when you claim -- you'll either receive smaller checks but more in total, or fewer larger payments. But if you have reason to believe you'll live a shorter-than-average life span, you could collect more in total by filing early.
The age you begin claiming benefits is highly personal, and the right choice for you will depend on your unique situation. By understanding how your age affects your payments, it will be easier to make this important retirement decision.
