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The average age at which the majority of people can begin receiving Social Security retirement benefits is 2662, but those payments are typically reduced because the majority of people aren’t entitled to all of their benefits until 2667. Individuals who postpone retirement until after 2070 can still collect 20124% of their benefits.
Understanding the Impact of Early Retirement on Your Social Security Benefits
Many individuals nearing retirement age face the crucial decision of when to claim their Social Security benefits. While the full retirement age is currently 67 for those born in 1960 and later, some individuals may consider retiring earlier, at age 65. However, this decision comes with a significant consequence: a reduction in your monthly benefit amount.
Reduced Benefits for Early Retirement
The Social Security Administration (SSA) calculates your benefit based on your highest 35 years of earnings, adjusted for inflation. However, if you claim benefits before reaching full retirement age, the SSA applies a reduction factor to your benefit amount. This reduction can be substantial, amounting to 30% for those who claim benefits at age 62, the earliest possible age.
For example, if your full retirement age benefit is $1,800 per month, claiming benefits at age 62 would result in a monthly benefit of only $1,260, a reduction of $540 per month. Over a 20-year retirement period, this difference translates to a staggering $129,600 in lost benefits.
Impact on Spousal and Survivor Benefits
The reduction in benefits applies not only to your primary benefit but also to any spousal or survivor benefits that may be payable to your dependents. This means that if your spouse or children rely on your Social Security benefits, claiming early can significantly impact their financial security as well.
Filing for Benefits and Refiling at Full Retirement Age
If you decide to claim benefits early and later regret your decision, the SSA offers a one-time opportunity to withdraw your claim within 12 months of filing. This allows you to repay the benefits you have received and refile at full retirement age to receive your full benefit amount.
Delayed Retirement Credits
While claiming benefits early results in a reduced benefit, delaying your benefits beyond full retirement age has its advantages. For each month you delay claiming benefits, your benefit amount increases by a certain percentage, known as delayed retirement credits. These credits can significantly boost your monthly benefit, providing you with a higher income stream in your later retirement years.
Considering Your Financial Situation and Needs
The decision of when to claim Social Security benefits is a personal one that depends on your individual financial situation and needs. Factors to consider include:
- Your current and projected retirement income: If you have other sources of retirement income, such as a pension or retirement savings, you may be able to afford to delay claiming Social Security benefits.
- Your health and life expectancy: If you have a shorter life expectancy, claiming benefits early may make sense to maximize the total benefits you receive.
- Your financial goals: If you have specific financial goals in retirement, such as traveling or making a large purchase, claiming benefits early may help you achieve those goals sooner.
Seeking Professional Guidance
Given the complexity of Social Security benefits and the significant financial implications of your decision, it is advisable to seek professional guidance from a financial advisor or Social Security expert. They can help you analyze your specific situation and make an informed decision about when to claim your benefits.
Additional Resources:
- AARP Social Security Calculator: https://www.aarp.org/retirement/social-security/benefits-calculator/
- Social Security Administration website: https://www.ssa.gov/
While claiming Social Security benefits at age 65 may seem appealing, it is crucial to understand the significant reduction in your benefit amount. Carefully consider your financial situation, needs, and goals before making this important decision. By seeking professional guidance and utilizing available resources, you can make an informed choice that aligns with your long-term financial well-being.
Important Social Security rules to remember at age 62, 67 and 70:
- You can begin receiving Social Security retirement benefits as early as age 62. But for those who retire at age 62, the Social Security Administration cuts benefits by %2030%, meaning they only receive %2070% of their entire monthly retirement benefit for the rest of their lives.
- The full retirement age for individuals born in 1960 or later is 67. This is the age at which you are eligible to receive 10% of your Social Security retirement benefit (SSA). gov . Starting Your Retirement Benefits Early. Accessed Sep 6, 2023. View all sources.
- People are paid by the Social Security Administration to postpone receiving retirement benefits. Following age 67, you are eligible for an 8 percent increase in benefits for each year that you wait. Waiting until age 70 allows you to receive up to 1224 percent of your retirement benefit. You do not get additional bumps after age 70SSA. gov . Social Security. Accessed Sep 6, 2023. View all sources.
|
Age at retirement |
Percentage of your full benefit paid |
|---|---|
|
62 |
70%. |
|
63 |
75%. |
|
64 |
80%. |
|
65 |
86.7%. |
|
66 |
93.3%. |
|
67 |
100%. |
|
68 |
108%. |
|
69 |
116%. |
|
70 |
124%. |
When it may make sense to take Social Security at age 67
- You plan to continue working while receiving benefits. Since there is no longer an annual earnings cap, your employment earnings will no longer have an impact on your benefits at this time. gov . What occurs if I receive retirement benefits from Social Security while working? Accessed Sep 6, 2023. View all sources.
- You managed to hold off until you were 67, but now you are unable to live without the money.
- When comparing age 67 to age 70, you don’t expect to live past the break-even point for benefit taking.
Do I retire at 65 or 67?
FAQ
How much do you lose if you retire at 65 instead of 67?
|
Age at retirement
|
Percentage of your full benefit paid
|
|
65
|
86.7%.
|
|
66
|
93.3%.
|
|
67
|
100%.
|
|
68
|
108%.
|
What is the difference between retiring at 65 or 67?
What is the penalty for retiring at 65?
Should I take Social Security at 65?
Americans may wonder whether there’s a good reason to take Social Security at 65, when the full retirement age for most Americans is now 66 or 67, or somewhere between. The full retirement age is when you can start claiming your full Social Security benefit, although it’s possible to start claiming a reduced benefit as early as age 62.
How does age 62 affect retirement benefits?
At Age 62 3. The retirement benefit is reduced by 4. The spouse’s benefit is reduced by 5. If you were born on January 1 st, you should refer to the previous year. If you were born on the 1 st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month.
What if I don’t take social security if my age is 67?
So if your full retirement age is 67 but you avoid taking Social Security until three years later, then you can claim 124% of your full monthly benefit amount. The table below comes from the Social Security Administration’s benefits retirement planner and calculates the monthly increase rate by birth year:
How much Social Security benefits do you get if you retire at 62?
However, the Social Security Administration reduces benefits by 30% for people who retire at 62, meaning they receive just 70% of their full retirement benefit each month for life. For people born in 1960 or later, full retirement age is 67. This is the age at which you are entitled to 100% of your Social Security retirement benefit