When should I file for Social Security retirement benefits? That's one of the biggest questions that Americans in their 60s must address.
To be sure, different answers will be right for different people. Some will choose to begin receiving Social Security as early as possible. Others will opt to wait until they're 70 to maximize the size of their monthly benefit checks. Here's what I think is the best argument for claiming Social Security at 65.
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A happy medium
Remember the classic children's story about Goldilocks and the three bears? Young Goldilocks enters the bears' home -- a cottage in the woods -- while they're away. She tastes from three bowls of porridge. One is too hot, another is too cold, but the third is just right. She tries sitting in three chairs. One is too hard, another is too soft, but the third is just right. Then Goldilocks lays on three beds. Two of them aren't to her liking, but, again, the third is just right.
For many Americans, starting to take Social Security at 65 will be -- as Goldilocks found with the third bowl of porridge, chair, and bed -- just right. It's a happy medium between the extremes of taking benefits at the earliest age possible, 62, and collecting them for as long a period as possible, or waiting until 70 when their monthly payments will be as large as possible.
That could be a good compromise solution for anyone eager to retire but leery of shrinking the size of their benefit checks too much. Yes, you will be penalized somewhat for collecting benefits before you reach your full retirement age (FRA). However, that penalty will be a significantly smaller percentage of your full retirement benefit than it would be if you claimed at 62.
You could boost your monthly benefit by holding off on taking Social Security until you reach your FRA, and you can boost it even more by waiting longer and earning delayed retirement credits. However, for many individuals, that would require them to continue to work for longer than they'd like.
One big plus to taking Social Security at 65 versus earlier
There's also one key advantage to taking Social Security at 65 compared to doing so at an earlier age. When you reach 65, you'll be eligible for Medicare.
This could be more important than you think. Healthcare ranks as one of the largest expenses for seniors. If you fully retire before reaching 65, you could have to pay for health insurance all on your own for some time. Individual health insurance premiums can be much more expensive than employer-provided health plans.
Most Americans don't have to pay any premiums for Medicare Part A, which covers inpatient stays. However, you will have to pay for Medicare Part B (which covers physician visits, lab tests, durable medical equipment, and more) if you choose to enroll. You'll also have to pay premiums if you enroll in a Medicare Part D prescription drug plan. It's the same story for Medicare Supplement and Medicare Advantage plans.
Still, reaching 65 is a major milestone: You'll receive some help from the federal government in covering your health insurance costs that you wouldn't receive if you fully retired earlier.
Another factor to consider
Keep in mind, though, that even if you claim Social Security at 65, you don't have to fully retire. You could continue working, either part time or full time. That could make a difference for many individuals who are deciding when to begin receiving Social Security retirement benefits.
One twist to be aware of, however, is that your benefits could be reduced if you make too much money. The Social Security Administration will withhold $1 for every $2 you earn above an annual limit if you're younger than your FRA for the entire year. In 2024, that limit is $22,320.
During the year you reach your FRA, the Social Security Administration will withhold $1 for every $3 you make above a higher annual limit during each month that you're still younger than your FRA. That annual limit is $59,520 in 2024.
Once you make it to your FRA, though, you can work as much as you'd like with no benefits withheld. Also, at that point, you'll begin to receive all of the money that was withheld earlier. Working even after starting to take Social Security at 65 could make this happy medium even more attractive for some Americans.
