Social Security's full retirement age is slated to rise over the next several years, and those who turn 62 this year will be the last to be able to get full retirement benefits at age 66. By 2022, those becoming eligible for early retirement benefits will have seen their full retirement age rise all the way to 67. For them, there will be a number of situations in which waiting until the new full retirement age makes sense. Let's look at a few of them.
When you want to avoid a bigger reduction in benefits for those who claim early
Most retirees know that claiming Social Security early results in smaller monthly payments. Under current rules, those who retire at age 62 get 25% less than they would if they waited until their full retirement age.
By the time the new 67-year-old retirement age kicks in, that penalty for early claiming will have risen substantially. Those who would be eligible to receive $1,000 in benefits at full retirement age will get only $700 at age 62, down from $750 under current law. The trade-off is that you'll have to wait five years rather than four to get the larger payments, but many will find the added incentive to be worth the wait.
If you want to raise the survivor benefits your spouse can receive after your death
Many people make their Social Security decision based solely on their own life expectancy. But if you're married, then you need to take into account the benefits your spouse will be eligible to receive on your work record.
Survivor benefits are based not only on your full retirement age benefit but also on when you claim your benefits, and if you decide to take a smaller payment by claiming early, then your spouse's survivor benefits will also suffer that same reduction. In some cases, even if waiting until age 67 doesn't seem to make sense from one person's perspective, it can be the best move when you look at the total amount of benefits your family will receive.
When you're planning to work that long anyway
You can receive Social Security benefits even if you continue to work and earn income, but the downside of doing so before you reach full retirement age is that you can lose some of your Social Security benefits. For 2016, if you earn more than $15,720 and won't hit full retirement age at some point during the year, then you'll lose $1 in annual benefits for every $2 you earn above the limit. Those who reach full retirement age during the year have a higher threshold of $41,880, and you lose $1 for every $3 over the limit on the portion of your earnings from the part of the year when you hadn't yet reached full retirement age.
Once you reach full retirement age, you don't have to worry about reductions to your Social Security. As a result, for many people, it makes sense just to wait until they retire. With many younger workers expecting to work well into their late 60s or even their 70s anyway, waiting on Social Security can be the best way to ensure you don't lose any benefits you'd be entitled to receive.
Claiming at age 67 might sound like a lot further into the future than you would want to wait to take Social Security. Yet it's worth comparing your situation to the ones described above to see if 67 is a better claiming age for you.
