If you're anywhere near retirement age, you've probably heard that the longer you wait to collect Social Security, the more you'll get per month. And that's true. Americans who qualify for retirement benefits can choose to start receiving them at any point between the ages of 62 and 70, and the longer you wait, the higher your monthly benefit will be.
However, many people don't know how much of a difference the age at which you claim Social Security makes. So, let's take a closer look at what it could mean to you to start collecting Social Security at the ages of 62, 67, 70, and any other age within that range.
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Here's how claiming age affects your Social Security benefits
For most people reading this, the full retirement age (FRA) for Social Security is 67 years old. This applies to everyone born in 1960 or later. However, as mentioned earlier, workers can choose to start receiving benefits at any age between 62 and 70.
The benefit you're entitled to if you wait until full retirement age (also known as your primary insurance amount, or PIA) is determined by your 35 highest-earning years, when adjusted for inflation. But if you choose to start collecting Social Security at any other age, here are the rules that determine the impact:
- Up to 36 months before full retirement age, your benefit will be permanently reduced by 6.67% per year for claiming early.
- Beyond 36 months, up to a minimum age of 62, your benefit will be further reduced by 5% per year.
- If you choose to wait until after full retirement age, your benefit will be permanently increased by 8% for each year you wait, up to age 70.
Here's what this all means. If your full retirement age is 67 and you claim Social Security at 62, your benefit will be 30% less than it would be if you waited until FRA. But if you wait until age 70 -- as long as possible to maximize Social Security -- your benefit will be permanently increased by 24% compared with your benefit at full retirement age.
What it means to your money
Let's take a look at some numbers to get a sense of how much of a difference this can make. Of course, it's impossible to say exactly what your Social Security benefit would be at 62, 67, and 70 without knowing your entire earnings history. But as an example, let's say that based on your work history, you'd be eligible for a $2,500 monthly Social Security benefit at full retirement age.
Using this as an example, here's how much you would get based on the age at which you start collecting your benefit.
|
Age When Benefits Start |
% Reduction or Increase |
How Much You'd Get ($2,500 at FRA) |
|---|---|---|
|
62 |
-30% |
$1,750 |
|
63 |
-25% |
$1,875 |
|
64 |
-20% |
$2,000 |
|
65 |
-13.3% |
$2,168 |
|
66 |
-6.7% |
$2,333 |
|
67 |
N/A |
$2,500 |
|
68 |
+8% |
$2,700 |
|
69 |
+16% |
$2,900 |
|
70 |
+24% |
$3,100 |
Data source: Author's own calculations. Numbers rounded to the nearest dollar.
Think about this for a minute. Someone who waits until 70 to start collecting Social Security would get $1,350 more per month than someone who starts at age 62 with the exact same earnings record. And the difference can be even greater if your full Social Security benefit is higher.
It's also important to note that the difference could be even larger, especially if you continue to work. If you're in your higher-earning years, delaying Social Security can not only increase your benefit because you're waiting, but it can potentially raise the average earnings that are used to calculate your Social Security benefit in the first place.
The bottom line is that the age at which you choose to apply for Social Security makes a big difference. Of course, there are some perfectly good reasons why you might want to claim Social Security early. But it's important to know how doing so will impact your monthly payments before you fill out the application.
