I've been working and paying Social Security taxes since I was 16 and got my first job -- and I'm not the only one. Social Security is an earned benefit, so as soon as you start bringing in income, you start contributing to the retirement fund.
Since I'll have been paying tax for many decades by the time I get to 62 and become eligible for benefits for the first time, I always thought I would claim Social Security ASAP, once I could. However, I've changed my mind in recent years as I learned more details about the benefits program.
Here are three big reasons for my major mindset shift about when I'll begin my benefits.
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1. I did the math on how much extra I'd collect if I waited
The first big thing that started to prompt my change of heart about Social Security was seeing the math on how much retirement benefits increase if you wait beyond full retirement age (FRA) to claim them.
A Social Security claim at 62 results in a 30% reduction in your standard benefit, based on early filing penalties. This means that if, for example, I was on track for a $2,000 monthly Social Security benefit, I'd cut that down to $1,400 by claiming at 62.
If, instead, I waited to claim Social Security until 70, though, I'd increase my monthly benefit. The benefits bump would raise my Social Security income by 24%, giving me $2,480 instead.
That's $1,080 more each month, assuming my benefit was around that $2,000 level. Doing the math and seeing just how much extra I'd be able to get later in life was definitely enough to get me thinking about changing my retirement planning process. After all, Social Security is protected against inflation, and I'll collect it for life, so maxing it out seems like a no-brainer.
2. I saw the data on lifetime benefits
Getting a lot of extra money from Social Security sounds nice, but waiting until 70, when I could claim at 62, did give me pause. After all, I'd be giving up a lot of years of benefits, and I'd need to make sure the higher future income I was collecting would make up for that.
However, taking a look at some additional data convinced me that claiming at 70 was still the best move. Multiple studies, including those from the National Bureau of Economic Research (NBER), have shown that a claim at 70 provides the best odds of maxing out lifetime benefits. In fact, NBER research revealed that around 90% of workers are better off waiting.
With the math and the research both making clear that my best odds for making the most of Social Security come from a later claim, I was quick to change my mind. I'll wait to claim and, if needed, live off my 401(k) and IRA distributions until I reach age 70 and feel ready to start my checks.
