The folks at MassMutual surveyed people in or near retirement last year, asking 13 questions about Social Security -- and 65% of respondents either failed or got a D. That's rather concerning, since Social Security provides nearly a third of the typical older American's income.
The earliest age at which you can normally start collecting Social Security benefits is 62. Benefits grow bigger if you delay, though, up to age 70. Here's a look at why you might not want to turn on the spigot too early -- and why, on the other hand, you might want to do so.
Image source: Getty Images.
Why it's best to delay starting to collect your benefits
The key reason to delay starting to collect your benefits -- until age 70, if possible -- is because doing so makes them bigger. First, know that everyone has a "full retirement age" (67 for most people) at which you can start to receive the full benefits to which you're entitled, based on your earnings history.
The table below shows just how much of your full benefits you can expect to collect, depending on when you start the checks rolling, relative to your full retirement age:
|
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% |
Data source: Social Security Administration.
While 124% of your full benefits is certainly more appealing than 70% of them, the difference is not quite as stark as it seems. Those collecting early will receive many more checks than someone who delays. Indeed, the system is designed so that those who live an average-length life will collect roughly the same amount in total from the program no matter when they start collecting their benefits.
So why delay until age 70, if you can? Well, it makes sense if you stand a decent chance of living a longer-than-average life -- which may be the case if you're physically fit and have relatives who've lived into, say, their 90s.
Delaying can also be part of a strategy with your spouse. Imagine, for example, that your earnings history is much richer than theirs, entitling you to heftier Social Security benefits. Whichever of you dies first will get to collect your larger benefit, and only that benefit. So it can be worth trying to maximize it.
Why you might want to start collecting your benefits early
If you stand a decent chance of living a shorter-than-average life, though, starting early can be your best move. Your checks may be smaller, but if you delay until age 70, you might receive far fewer checks, and not for that many years.
Regardless of their life expectancy, many people pretty much have to claim their Social Security benefits early because they need the money. It's not uncommon to find yourself out of the workforce earlier than you planned to be, or to be sidelined by a health issue (or a loved one's health issue that turns you into a caregiver).
In a cheerier scenario, if you have successfully saved a lot during your working life and you have a fat nest egg, claiming benefits early may help you retire early.
As you plan for your retirement -- something we all should do, and not only when retirement is around the corner -- give the question of when to start receiving Social Security some thought.
