Social Security keeps tens of millions of older Americans above the poverty line. It's likely to provide critical income to you, too, when you're retired.
It's important, then, to make savvy decisions regarding Social Security -- such as when to claim your benefits. Here's a look at the best age for most people to do so -- and why you might want to claim your benefits earlier.
Image source: Getty Images.
When to claim your Social Security benefits
Let's start with the basics. You can start collecting your benefit checks as early as age 62, but doing so will result in smaller checks (though you'll collect many more of them). You can get bigger checks (though fewer of them) by delaying starting to collect them -- up to age 70. With each year you delay beyond your "full retirement age" (66 or 67 for most of us), your benefits will grow by about 8%.
The table below shows how much of your full benefits you'll receive depending on when you claim them:
|
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% |
Source: Social Security Administration.
The system is designed so that for those who live average-length lives, they'll collect roughly the same total benefits no matter when they start collecting.
Survey says...this is the best age to claim Social Security
So given all that, when is the best age at which to claim your Social Security benefits? A study conducted by online financial planning company United Income offers an answer. It looked at the claiming decisions of about 20,000 retired workers using data from the University of Michigan's Health and Retirement Study.
Here are its findings, in the researchers' own words:
- Only 4% of retirees make the financially optimal decision about when to claim Social Security
- About 57% of retirees would build more wealth through their life if they waited to claim until they were 70 years old (when only 4% of retirees currently claim)
- ... only 6.5% of retirees would have more wealth if they claimed prior to turning 64 (when over 70% of retirees currently claim benefits)
In other words, most people are claiming early, and most people would be best off delaying until age 70. Yikes.
When should you claim your benefits?
Still, not everyone can -- or should -- delay until age 70. It's best for 57%, but that means it's not optimal for 43%. So here are some factors to consider that can help you figure out when you should claim your Social Security benefits.
- If you stand a decent chance of living a shorter-than-average life, it can make sense to claim your Social Security benefits early -- and vice versa.
- If you simply need more income when you're still in your early 60s, starting to collect early can be reasonable. Many people who have lost jobs may need to claim early, for example.
- For those who can delay, delaying is often best.
- Another reason to delay is because the bigger your initial benefit, the bigger your nearly annual cost-of-living adjustments (COLAs) will be, too.
- Married couples might want to maximize the higher earner's benefits, because when one dies, the survivor will get to collect the higher benefit of the two. So perhaps just one of them delays until age 70, while the other can claim early. Or if both can delay, that can be effective, too.
So take some time to develop a good retirement plan and to learn more about Social Security in order to make money-saving or money-making decisions. And consider consulting a financial advisor, too, if it all seems too confusing or intimidating. It's important stuff, after all.
