There's no perfect age to begin collecting Social Security, but many people are waiting until age 70 because of benefit-boosting, delayed retirement credits. If you're filing for Social Security at age 70 this year, then those credits are going to result in a monthly Social Security payment that's a lot bigger than if you filed when you were younger.
How much bigger? The maximum Social Security benefit at age 62 is $2,324 in 2021 but swells to $3,895 per month if you're retiring at age 70 this year. That's 67.5% more in monthly retirement income.
Granted, not many people qualify for the maximum Social Security amount. Social Security benefits are based on pre-retirement income, and qualifying for the biggest payment requires a 35-year track record of income above the annual payroll tax limit, which is $142,800 in 2021. Nevertheless, delayed retirement credits increase benefits by a fixed percentage for each month you delay, so you'll still pocket considerably more income by delaying than you will if you claim early.
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Claiming at 62? It can be costly
There are plenty of reasons many workers choose to retire at 62, rather than waiting until age 70. For instance, retirement goals that include extensive travel or physical activity may be easiest when you're younger and potentially healthier.
Yet claiming early comes with an expensive trade-off. While Social Security's designed to replace about 40% of the average person's pre-retirement income, that's only true if the worker waits until full retirement age (FRA) to begin receiving benefits. If you were born after 1954, then FRA ranges between age 66 to age 67 for people born in or after 1960.
If you start receiving benefits earlier than FRA, you'll be subject to a penalty that reduces your benefit amount by a fixed percentage for every month you claim early. As you can see in the following chart, claiming at age 62 can lower your Social Security by up to 30%. That's a lot less money, especially when you consider that the average person retiring in July 2021 was awarded benefits of just $1,656 per month.
| Claim at Age 62 Benefit Reduction Amounts | |
|---|---|
| Full Retirement Age | Reduction |
| 66 | 25% |
| 66 and 2 months | 25.83% |
| 66 and 4 months | 26.67% |
| 66 and 6 months | 27.50% |
| 66 and 8 months | 28.33% |
| 66 and 10 months | 29.17% |
| 67 | 30% |
DATA source: SOCIAL SECURITY ADMINISTRATION. Chart by author.
Waiting can pay off big
Alternatively, waiting to collect Social Security results in a substantially larger benefit. If you were born in or after 1943, then delayed retirement credits increase your benefit amount by 2/3 of 1% for every month you delay beyond FRA, up to age 70. That works out to an 8% bonus for being patient when it comes to filing for your benefit.
For example, let's assume you're turning age 62 this year. That makes your full retirement age 66 years and 10 months. If you wait until then to claim, you'll receive 100% of your benefit amount, but if you wait until age 70, you'll receive 125.3% of your FRA benefit amount.
| Delayed Retirement Credit Additional Benefits for People Born in 1959 | |
|---|---|
| Claiming Age | Multiply FRA Benefit by |
| 66 and 10 months | 100% |
| 67 | 101.3% |
| 68 | 109.3% |
| 69 | 117.3% |
| 70 | 125.3% |
Source: Social Security Administration. Table by author.
How to get the biggest benefit
Getting the maximum benefit available at age 70 might not be in the cards, but there are strategies you can employ to boost your benefit beyond delayed retirement credits.
For instance, if you have fewer than 35 years of income subject to payroll taxes, then working additional years eliminates zeros in Social Security's calculation, increasing your historical average monthly earnings. Similarly, if your income is below the payroll tax limit, then lobbying for regular pay raises or working a second job that's subject to payroll taxes can also increase your historical average monthly earnings, increasing your benefit.
Ultimately, the right age to claim Social Security depends on your personal situation. Frankly, what's best for somebody else might not be best for you.
Nevertheless, increasingly more people are delaying Social Security to maximize their retirement income. According to Social Security, 40% of men and 44% of women who were eligible for Social Security benefits at age 62 were claiming them between 2000 and 2004, but those figures have since dropped to 22% and 25%, respectively.
