More than 51 million people aged 65 or older are collecting Social Security retirement benefits, and you'll likely be one of them in the future (unless you already are). Social Security benefits make up nearly a third of the income of the elderly, so they may be vital to your retirement.
Thus, its good to understand how Social Security works and what steps you might take to increase your benefit checks, as the size of your benefits is partly under your control.
Image source: Getty Images.
When were you born?
Let's start with when you were born, because that determines your full retirement age. This is the age when you're eligible to start receiving the full benefits to which you're entitled, based on your earnings history:
|
Birth Year |
Full Retirement Age |
|---|---|
|
1937 or earlier |
65 |
|
1938 |
65 and 2 months |
|
1939 |
65 and 4 months |
|
1940 |
65 and 6 months |
|
1941 |
65 and 8 months |
|
1942 |
65 and 10 months |
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 and later |
67 |
Data source: Social Security Administration.
For example, if you were born in 1965, your full retirement age is 67. That's the age at which you can start collecting 100% of your benefits.
Early, late, or on time?
You don't have to start collecting at age 67, though. Benefit checks can start rolling in as early as age 62, or you might delay starting to collect them until age 70. The earlier you start, the smaller your checks will be -- but you'll end up collecting many more of them than had you delayed. Delaying, meanwhile, will make your checks bigger by 8% for every year you delay from age 67 to age 70.
The table below shows how much of your full benefits you'll collect if you claim them before or after your full retirement age (which is 66 or 67).
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Data source: Social Security Administration.
Delay from age 67 to 70 and your checks will be 24% bigger. They can even get 30% bigger if your full retirement age is 66 and you delay until age 70. (Note that there's no benefit to delaying beyond age 70.)
Of course, just as with claiming your benefits early, not only does the size of your benefit change, but the number of checks you receive changes as well. Imagine that you live to age 80. If you start collecting smaller checks at age 62, you'll collect them for 18 years -- about 216 or so checks. Start at age 70, and there will be 10 years of checks -- about 120 of them.
What's right for you?
So is collecting earlier or later better? Well, there's no one-size-fits-all answer. The system is designed so that total benefits will be roughly the same no matter when you start collecting, for those who live an average-length life. (The average life expectancy was recently about 76 years for men, and about 81 years for women.) Still, there are reasons to opt for collecting your checks early or late.
You might collect early if:
- You simply need the income as early as possible, perhaps due to a job loss or health setback.
- The income is part of your early retirement plan.
- You stand a decent chance of living a shorter-than-average life.
You might collect late if:
- You enjoy your job and want to keep working.
- You stand a decent chance of living a longer-than-average life.
- Delaying and maximizing your benefit is part of a strategy with your spouse.
Take some time to learn more about Social Security and carefully think through your decision of when to claim your benefits. For starters, know that you may be able to make your benefits 24% larger -- enough to turn a $2,000 check into a $2,480 one.
