One of the most important decisions you'll make in retirement planning is when to start collecting Social Security.
Most people become eligible for Social Security retirement benefits at age 62, and many waste no time when it comes to start collecting their monthly checks from the government. But that comes with a significant downside: Claiming early means a smaller check.
In fact, most people will receive just 56% of what they could have eventually collected if they had waited all the way until age 70 instead, when benefits max out. Nearly as many retirees opt to split the difference and wait until their full retirement age. That will be age 67 for anyone born in 1960 or later.
The truth is there's no one correct answer for the best age to start collecting Social Security. As with most matters of personal finance, the answer depends on your personal circumstances. Here's how to know whether the best age to claim for you is 62, 67, or 70.
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Who benefits from claiming at age 62?
There are two groups of people who could benefit from claiming as early as age 62.
The first group are widow(er)s. If you lost your partner, you're eligible for survivors benefits, which can be worth up to the amount your late spouse was receiving (or would have received) from Social Security.
One small detail is that you can claim your personal retirement benefit without impacting your survivors benefits. So a common tactic is to claim your personal benefit at 62, and let your survivors benefits max out before switching to them at full retirement age. (It might be more beneficial for some to claim survivors benefits early and wait to claim their personal benefit.)
The other group are lower-earning spouses. When you factor in your total household income, it often makes sense for the lower-earning spouse to start Social Security immediately upon becoming eligible. The higher-earning spouse should wait to claim benefits. At that point, the lower-earning spouse might switch to spousal benefits. This strategy, more often than not, will maximize expected household income from Social Security based on life expectancies.
Who benefits from claiming at age 67?
Age 67 is important for anyone born after 1960, as it represents their full retirement age.
Once you reach full retirement age, your spousal and survivors benefits will max out. As such, anyone who plans to claim spousal benefits should claim at age 67 at the latest in order to get the most out of Social Security. Even if you have to wait for your spouse to claim before switching to spousal benefits, it makes sense to start collecting your personal benefit at 67.
While 62 may be the statistically optimal age to claim normal retirement benefits for lower-earning spouses, it often makes sense to wait until 67 for those planning to collect spousal benefits. That's because many view Social Security as insurance against outliving their retirement savings.
Waiting until age 67 to claim benefits for the lower-earning spouse is a bet that the lower earner will live a longer-than-average life. And who wouldn't want to bet on themselves? (If lower-earning spouses will collect more from personal benefits than from spousal benefits, they might even delay all the way until age 70.)
Even if you have ample retirement savings, it might make sense to wait until age 67. That will give you more time to do some long-term tax planning and position your retirement assets for a lower tax liability once you start collecting Social Security. Taxes become a lot more complicated and harder to avoid once you have extra income from the government coming in.
Who benefits from claiming at age 70?
As mentioned, age 70 is when personal retirement benefits will max out. There are two groups of people who will get the most out of Social Security by waiting until age 70.
The first group are unmarried individuals. If you're in single-player mode, the math is very simple. Based on average life expectancies, an individual will collect more in lifetime income from Social Security by waiting until age 70 versus any other age.
If you have reason to expect you'll live a shorter-than-average life, you might claim earlier. But you might also consider Social Security as insurance against outliving your savings and decide it's worth waiting.
The second group are higher-earning spouses. The high-earning spouse benefits from the same math as an individual -- higher expected lifetime income from waiting -- but there's an additional benefit that makes waiting until 70 even more compelling. Survivors benefits are equal to the amount the late spouse was collecting prior to passing. So, if you are the higher earner and pass away before your spouse, your partner gains the benefits of you waiting until age 70. That dual life-expectancy factor tips the scales heavily in favor of waiting to collect Social Security for higher-earning spouses.
Considering the importance of Social Security to total household income in retirement, planning well in advance of when you're going to claim can have a huge impact on your finances in retirement. Figuring out which age is best for you will pay dividends well into the future.
