What Age Should You Start Social Security?

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By Sandra Block From Kiplinger’s Personal Finance

Waiting until age 70 to file for Social Security retirement benefits is one of the most effective ways to reduce the risk that you’ll run out of money in your later years. But in some instances, filing for benefits at your full retirement age (FRA) or even earlier could provide more financial security for you and your family.

You can file for benefits as early as age 62, but your monthly payout will be as much as 30 percent lower than the amount you’ll receive if you wait until your full retirement age. (FRA is 66 if you were born between 1943 and 1954; it gradually rises to 67 for younger people.) Your annual cost-of-living adjustment will be lower, too, because the cost of living adjustment (COLA) is based on the amount of your benefit.

If you delay starting benefits until after you reach full retirement age, you’ll receive an 8 percent delayed-retirement credit for each year you postpone claiming benefits from that age until 70. Workers who reach full retirement age at 67, for example, would receive a 24 percent increase in benefits by waiting until age 70 to file. (At www.ssa.gov/OACT/quickcalc, Social Security provides a calculator you can use to estimate your benefits based on the year you plan to retire.) Yet despite those advantages, less than 10 percent of retirees wait until 70 to claim benefits, and about 30 percent claim them at 62, according to the Congressional Research Service.

Sometimes individuals don’t have the luxury of waiting until full retirement age—let alone until 70—to file for benefits. Although nearly 70 percent of workers expect to retire at age 65 or older, in reality, only 34 percent of retirees managed to work that long, according to research by J.P. Morgan Asset Management.

When that happens, claiming Social Security—even with the haircut—can provide much-needed financial stability, says Ashton Lawrence, a certified financial planner in Greenville, South Carolina.

Other retirees file for Social Security as early as 62 because they don’t expect to live long enough to benefit by waiting.

You may have heard about the break-even point, which is the age at which the value of claiming larger benefits for a shorter period—starting at age 70, for example—outweighs the benefits of claiming a smaller payout for a longer period—say, by starting at age 62. Estimates of break-even points vary, but an analysis by J.P. Morgan Asset Management recommends claiming benefits as early as 62 if you don’t expect to live past 77. If you expect to live beyond 77, postpone benefits until at least your full retirement age, and if you expect to live beyond age 81, consider waiting until age 70 to file for benefits, the analysis suggests.

Most Americans will live past age 77, and many will live into their eighties or beyond. According to the Social Security Administration, a 62-year-old man has a 71 percent chance of living to at least age 77 and a 58 percent chance of living to age 81; a 62-year-old woman has an 80 percent chance of living to at least 77 and a 69 percent chance of living to 81.

©2024 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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