When should you retire? That's a question many Americans begin asking when they reach their late fifties -- and perhaps even sooner. And this question leads to another important one: When should you claim Social Security retirement benefits?
The earliest age at which you can begin receiving retirement benefits is 62. Some wait until age 70. But is 65 the perfect age to start collecting Social Security?
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In support of claiming Social Security at 65
One reason many might view 65 as the perfect age to claim Social Security is that it's been the traditional retirement age in the U.S. in the past. For decades, beginning to collect Social Security at 65 was practically a rite of passage for American seniors.
Granted, Social Security's full retirement age (FRA) has gradually increased since 1985 and is now 67. However, 65 remains the eligibility age for Medicare. This is also a key factor in support of claiming Social Security at 65: You won't have to bear the full cost of health insurance as you would if you began collecting retirement benefits earlier.
To be sure, your benefits at 65 won't be as much as they'd be if you waited until 67. Social Security will reduce your benefits by five-ninths of 1% for each month you begin collecting before reaching your FRA. For anyone whose FRA is 67 but who claims retirement benefits at 65, this amounts to a reduction of roughly 13.3%. But this is much less than the 30% penalty you'd incur if you claimed benefits at 62.
In some ways, collecting Social Security at 65 presents a happy medium between claiming benefits as early as possible at 62 and waiting until your FRA (or later). You get to retire a couple of years sooner than holding off until you reach your FRA, but your benefits are still relatively close to what they would be if you waited.
Other "perfect" ages for some Americans
Not everyone will view 65 as the perfect age to begin receiving Social Security. The most popular age to claim retirement benefits is 62. Many Americans seem to agree with the premise of the Steve Miller Band's 1976 hit song, "Take the Money and Run."
Some of these individuals worry that Social Security will run out of money in the next decade, so they want to get as much of their benefits as they can before that happens. Others are concerned about their health and think claiming as soon as possible will increase their lifetime benefits.
The current full retirement age of 67 is another good candidate as the perfect age to claim Social Security. There's no early retirement penalty. There's no earnings test that could affect your benefits if you continue working while receiving Social Security benefits.
If you're seeking to maximize your Social Security benefits, though, 70 could be your perfect age to claim. Social Security will pay you delayed retirement credits of two-thirds of 1% for each month you push back collecting benefits beyond your full retirement age up to age 70. Waiting until 70 to claim benefits, therefore, will increase how much you receive from Social Security by 24%.
The illusion of perfection
Is 65 the perfect age to begin collecting Social Security retirement benefits? Not really. Neither is 62, 67, or 70. The reality is that there is no one-size-fits-all perfect age to claim Social Security.
Whenever you claim Social Security retirement benefits, you'll make some trade-offs. If you decide to claim at 62, you'll forego additional benefits and will probably have to pay health insurance premiums on your own for a few years. If you continue working and then claim at 67 or 70, you could have health problems that make you wish you had retired sooner.
The smartest thing to do is evaluate your retirement goals, your financial position, your health, and your expected longevity to decide when to claim Social Security benefits. Whatever age you pick will be close enough to perfect for you.
