Social Security will probably end up being a critical retirement income stream once you stop working. So it’s important to file for benefits carefully.
Once you turn 62, you can technically file for retirement benefits at any time. But there are certain key ages you should know about that will have an impact on the amount of money you receive each month.
Let’s review three big Social Security birthdays and how they influence your monthly benefits so you can develop a filing strategy that works for you.
Age 62
Age 62 is the earliest age you can claim Social Security. But you should know that filing for benefits before full retirement age (FRA) will mean reducing them permanently.
If you were born in 1960 or later and you claim Social Security at 62, your monthly benefits will be slashed by about 30%. That doesn’t just mean less money each month. It also means less money each time Social Security benefits get a cost-of-living adjustment (COLA).
That said, filing for Social Security at 62 isn’t necessarily a bad idea. If your health is poor and you don’t expect to live a long life, claiming benefits at 62 could put more lifetime Social Security in your pocket compared to filing later.
Age 67
Age 67 is FRA for people born in 1960 or later. If you fall into that category, at 67, you can collect your monthly Social Security checks without any sort of reduction.
Of course, there’s a tradeoff. Since you can start taking benefits up to five years sooner, waiting until 67 to file for Social Security may mean having to work longer or put off certain goals. But if you expect to depend heavily on Social Security for retirement income, then slashing your benefits with an early claim may not be a good idea, making age 67 a more optimal time to file.
Age 70
For each year you put off your Social Security claim past FRA, you accrue delayed retirement credits that boost your monthly benefits by 8%. Those credits, however, stop accumulating once you turn 70.
For this reason, 70 is generally regarded as the latest age to file for Social Security. This doesn’t mean that you can’t sign up for benefits at 71 or beyond. Rather, it means that there’s no good financial reason to wait past 70 to start getting your monthly checks.
Now the upside of claiming Social Security at 70 is clear. Larger monthly checks could give you a lot more financial freedom in retirement. They can also make future COLAs more valuable to you.
But you may have to make sacrifices to put off your Social Security claim until 70, like working longer or delaying certain plans. And if you don’t end up living a very long life, a claim at 70 could result in less lifetime Social Security income despite having increased your payments on a monthly basis.
It’s a big decision
Of course, 62, 67, and 70 are only three potential Social Security filing ages. As mentioned above, you can sign up for benefits at any age as long as you’re at least 62. You may, for example, opt to file for Social Security at 65 in conjunction with your Medicare enrollment.
The key, though, is to understand the financial implications of claiming Social Security at different ages.
If you’re entitled to $2,000 a month in Social Security at 67, at 62, that same benefit is only worth $1,400. At 70, it’s worth $2,480.
You’ll need to factor in your retirement goals, income needs and sources, and life expectancy to arrive at the filing age that makes the most sense for you, whether it’s one of the three highlighted above or a different age entirely.
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