The age at which to take Social Security seems to be a never-ending discussion.
One reason is that there is no clear-cut response. Your own scenario will define the ideal age for you, even if it differs from your friends, family, or the financial press.
In the end, there are benefits and drawbacks to claiming Social Security at any age, and you must decide what is best for your financial security.
Take a look at three main reasons retirees take Social Security, and whether they are right for you.
62 (Early Retirement)
Unsurprisingly, over 25% of retirees choose to collect Social Security at age 62.
After all, getting “free” money from the government is appealing. This is the greatest option for some retirees.
If you have few other options and rely on Social Security to feed your family, you may have no alternative but to file early.
Others select 62 to receive checks for as long as possible. Others choose to relocate to a low-cost country where a Social Security check, even at age 62, is sufficient to live.
The major disadvantage of taking Social Security at age 62 is that your payment will be around 30% smaller than if you waited until age 67.
67 (Full Retirement)
Full retirement age for persons born in 1960 or after is 67.
Since the introduction of Social Security in the 1930s, more Americans are not just living longer but also working longer.
Rather than a gold watch and a pink slip at 65, many Americans now work until 67.
This is why the number of Americans taking Social Security at age 62 has been declining since the mid-2000s.
Taking Social Security early may not be necessary if you plan to work until full retirement.
Waiting until 67 increases a $1,400 monthly payout to around $2,000 – and this “pay raise” is permanent.
70 (Late Retirement)
You’re in good company if you can wait until 70 to claim Social Security. According to the Social Security Administration, only 5% of men and 7% of women filed at age 70.
There are several reasons. As for waiting eight years after retirement, many retirees just cannot afford it.
Second, Americans in poor health may worry about not living to turn 70 or losing their benefits.
But if you don’t need the money — maybe you’ll keep working or have another source of income — or you’re in great shape, waiting until 70 can pay off handsomely.
If you were born in 1943 or later, each year you delay claiming Social Security beyond age 67 increases your checks by 8%.
That’s almost as good as the stock market, one of the greatest performing asset groups, without the danger.
A $2,600 monthly payout at 67 might climb to $3,300 at 70.
What Is Breakeven?
No matter when you started receiving benefits, you will have received the same amount. Assume you can receive $1,500 monthly at age 62 or $2,100 monthly at age 67.
Starting at 62, you’ll have $90,000 by 67. Since you would have earned an extra $600 per month at 67, it will take 150 months (12.5 years) to break even.
In this scenario, starting at age 62 or waiting until age 67 will earn you the same amount of money at age 79.5.
If you want to maximize your total benefits, you’ll have to guess whether you’ll live past breakeven.
No one knows how long they will live, but you can estimate it using variables like life expectancy tables and your own overall health and well-being.
A healthy person from a long-lived family will likely earn the most by delaying benefits until age 70.
When should you take your Social Security benefits?
Your health, current retirement funds, life goals, and anticipated retirement date all play a part in determining the ideal age to maximize your benefits.