Social Security offers flexibility to seniors by allowing retirees to claim benefits at a choice of different ages, depending on what makes sense for them. The earliest age when you can claim your retirement benefits is 62, but once you reach that milestone, you can start collecting payments at any time -- although waiting beyond 70 typically would not make sense.
With such a wide range of choices about when to get your checks started, the big question is, when should you file for your benefits to begin? Three of the most common ages are 62, 67, and 70. Here are some details about why so many people claim at these points, and how to decide which is right for you.
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Claiming Social Security at 62
Since 62 is the earliest age you can start getting benefits, many people start them then. There are some obvious reasons why this can make sense. For one thing, you may need your benefits in order to afford to retire, and you may be ready and eager to leave the workforce.
Claiming benefits at 62 also means you start getting checks as soon as you're eligible, so you can begin collecting before any future potential cuts, and before the value of your buying power declines -- some evidence suggests benefits aren't keeping up with the cost of living, even though there are periodic adjustments that are designed to make that happen.
Of course, there are downsides, too. If you start benefits at 62, you're considered an early claimer because you're starting payments before your designated full retirement age (FRA). If you don't wait until FRA, you are subject to early filing penalties that reduce your standard payment. These reduce benefits by 5/9 of 1% for the first 36 months and 5/12 of 1% for any prior month, adding up to a 6.7% reduction in each of the first three years and an additional 5% reduction for each prior year.
An early claim also reduces survivor benefits, which would be available to your spouse if you passed away first. If you were the higher-earning person in your relationship and you reduce survivor benefits through an early claim, you could make it a lot harder for your spouse to cover the bills if you pass away first.
Claiming Social Security at 67
For anyone born in 1960 or later, 67 is full retirement age. FRA is the age when you can claim benefits and receive your standard benefit. It will not be reduced by early filing penalties, nor will it be increased by delayed retirement credits.
If you claim benefits at your FRA, you'll also be allowed to work while collecting benefits, which can be important if you were hoping to double dip and get a paycheck and Social Security. If you claimed before FRA, benefits would have been reduced if you earned too much.
The downside of claiming at FRA is that you miss several years of checks you'd have received if you claimed at 62. You'll want to calculate how long you think it will take to break even for the missed benefits, based on how much income you didn't collect and how much higher your payment is now.
For example, if you had a standard Social Security benefit of $1,900 at 67 and claimed at 62, you'd have reduced your monthly payment to $1,330 by getting hit with five years of early filing penalties. Of course, for five years, you'd have received payments totaling $79,800 over time (five years of payments times $1,330 per month). However, you'll be getting $570 more per month by avoiding early filing penalties. To see how many months it takes to make up for the $79,800 you left on the table, divide that amount by the extra you get. So, $79,800 divided by $570 means you'd break even in 140 months, or 11.66 years.
If you expect to live longer than that, then a claim at 67 is better than one at 62.
Claiming Social Security at 70
Age 70 is another popular time to claim Social Security, and it can be a great option because it allows you to maximize the monthly income you get. That's because each month you wait to claim benefits after FRA, you raise your standard payment by 2/3 of 1%. So, if you were slated to get $1,900 at age 67 and wait another three years, you'll see a 24% benefits increase and bring home $2,356.
You'll want to do a break-even calculation again by considering how long it will take to make up for more years of foregone checks, but studies have shown around 7 in 10 retirees end up with more lifetime income by claiming at 70, so the odds are in your favor if you wait. Waiting until 70 also maxes out your survivor benefits.
Of course, there are downsides, including that you may not have enough money to retire without Social Security, so you could get stuck working until 70.
Ultimately, you need to consider all of the pros and cons of retiring at any of these different ages in order to decide what makes the most sense. As you do, think about your ability to retire, the stability of your other income beyond Social Security, and how you want to provide for loved ones after you're gone.
By learning when you'll break even for missed benefits and by taking all these other issues into account, you can make the ideal claiming choice to make the most of your Social Security that you worked hard to earn.
