Some big numbers can be hard to believe. For example, think of the old saying that Arctic aboriginals have 100 or even hundreds of words for "snow." That's not quite correct, it turns out -- though the Inuit language does have dozens of ways of expressing it. Here's another doozy: There are thousands of possible strategies for when you should claim your Social Security benefits. And that one is true!
Fortunately, while the decision of when to start your Social Security retirement benefits flowing is a critically important one, it's not quite as complex as it may seem. Here's what you need to know.
Image source: Getty Images.
Social Security claiming basics
For starters, know that each of us has a "full retirement age," which is the age at which we're eligible to start receiving the full benefits to which we're entitled, based on our earnings history. For most workers today, it's 66 or 67, and it's 67 for anyone born 1960 or later. If your full retirement age is 67, though, you don't have to claim your benefits right then.
You can start receiving your retirement benefits as early as age 62. Starting early will shrink your benefit checks, but you'll be receiving many more of them. The system is actually designed so that for those who live average-length lives, total benefits will be roughly the same no matter when you start.
You can also delay starting to receive your benefits, and for every year that you do so, from your full retirement age to age 70, your benefits will increase by about 8%. The table below shows how much of your full benefits you can expect to collect in retirement, depending on when you claim them:
|
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.
Thousands of strategies
From the information above, you might think there are only nine strategies regarding when to claim Social Security benefits -- that you can do so at age 62,63, 64, 65, 66, 67, 68, 69, or 70. When the Social Security Administration (SSA) wrote about the thousands of strategies, it got a bit more granular, noting that you might turn on your Social Security spigot in any one of the 12 months of each of those nine years -- so there are 108 months in which you might start.
Meanwhile, if you're married, your spouse probably also has 108 months in which they might start collecting Social Security. And while you might start at, say, age 64 and seven months, your spouse might start at, say, age 69 and one month. See how there are many, many combinations?
How to decide
Fortunately, you probably don't have to think too hard about which month is best for you. Figuring out the best year is enough for many people. Here are some key factors to consider as you deliberate:
Reasons to collect early:
- You simply need the income as early as possible, perhaps due to a health issue or job loss.
- You stand a decent chance of living a shorter-than-average life.
- The income is part of an early retirement plan.
- You're done working, and you need the income.
Reasons to delay:
- You enjoy your job and want to keep working.
- You stand a decent chance of living a longer-than-average life.
- You want to lock in fatter checks -- and enjoy bigger cost-of-living adjustments on them.
- Delaying and maximizing your benefit is part of a strategy with your spouse.
Each of us needs to have a solid retirement plan in place, including how much money we think we'll need in retirement and how we'll get it. Don't assume Social Security will be enough, because it probably won't. As of August, the average benefit was only $1,840, or about $22,000 for the year.
The more you know about Social Security, the more you may be able to get out of it.
