There are few retirement decisions someone makes that have as big an impact as when they decide to claim Social Security benefits. For many Americans, Social Security is a large portion of their retirement income, so the decision could directly impact their livelihood.
There's no cookie-cutter approach to deciding when's the perfect time for you, but there are common factors that everyone should consider before deciding. And while there are good arguments for claiming benefits early or late, here's the best argument for claiming them at 67.
Why your full retirement age is important
If there were a starting place for understanding more about Social Security, it would be knowing your full retirement age (FRA). Your FRA is the age when you're eligible to receive your full Social Security monthly benefit. It serves as the baseline for calculating your benefits if you decide to claim them before or after your FRA, so it's essential to know it to make an informed decision.
FRAs are based on your birth year as follows:
| Birth Year | Full Retirement Age |
|---|---|
| 1943-1954 | 66 |
| 1955 | 66 and two months |
| 1956 | 66 and four months |
| 1957 | 66 and six months |
| 1958 | 66 and eight months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
Data source: Social Security Administration. Table by author.
You can claim benefits starting at age 62, but your monthly payout will be reduced based on how many months away you are from your FRA. Within 36 months, benefits are reduced by five-ninths of 1% monthly. Each month after 36 will reduce them by five-twelfths of 1%. Someone whose FRA is 67 will have their benefits reduced by 30% if they claim at 62.
The opposite also applies, with monthly retirement benefits increasing by two-thirds of 1% for each month you delay them past your FRA. This works out to benefits increasing by 8% annually and 24% if your FRA is 67 and you claim at 70.
Increased monthly benefits may not be worth the wait
The prospect of increased monthly payments can seem enticing, but it may not be worth the wait for everyone.
The average Social Security retirement benefit in August 2023 was around $1,792, so we'll use that as an example. If someone's FRA was 67 and they claimed benefits at 70, they could expect to receive $2,222 monthly. Here's the total amount they would've received at certain ages based on when they claimed.
| Claiming Age | Monthly Benefit | Total at Age 75 | Total at Age 80 | Total at Age 82 1/2 |
|---|---|---|---|---|
| 67 | $1,792 | $172,032 | $279,552 | $333,312 |
| 70 | $2,222 | $133,320 | $266,640 | $333,300 |
Calculations by author.
It would take someone claiming benefits at age 70 until around 82 1/2 to reach the point where their total benefits equaled the total received by claiming benefits at 67.
Considering the life expectancy for men and women at age 67 is 82.58 and 85.10, respectively, the decision to delay benefits past 67 may not make financial sense, especially for men. It's a bit different for women, since they have a longer life expectancy, but the 36 months of missed payments between 67 and 70 shouldn't be glossed over.
When to claim benefits isn't a simple decision
Unless not claiming Social Security benefits threatens your livelihood, the decision on when to claim is, unfortunately, not that straightforward. There are a handful of factors to consider, but some of the most important are personal and family health history, current financial situation, retirement goals, and other sources of retirement income.
For instance, if you're in good health and your family has a history of longevity, you may be comfortable delaying benefits because you'll likely earn more throughout retirement. The same can be said for someone with ample investment income; not claiming Social Security may not affect their daily life, so delaying is worth the added money.
On the other end, factors like less-than-ideal health, limited savings, or immediate financial obligations could all drive someone to claim benefits early or at their full retirement age. It doesn't have to be a "negative" factor that justifies claiming Social Security at your full retirement age, either. Sometimes, it's as simple as wanting the maximum amount of money to enjoy your retirement in the present -- and that's perfectly fine too.
