Determining your ideal Social Security age requires a combination of calculating your expected benefits, analyzing your projected financial situation, and assessing your health.
Generally, the longer you can delay taking Social Security, up until age 70, the better off you’ll be. While you can start collecting benefits at age 62, your monthly benefits will be the lowest at that point, whereas claiming Social Security at age 70 will earn the maximum retirement credits allowed and thus yield your highest possible monthly benefit.
We generally recommend that people wait until “full retirement age,” age 65–67 depending on year of birth, so that they can receive their unreduced, full benefit. However, if you have health conditions that reduce your life expectancy or if you are in financial need of Social Security income, you may be better off claiming your benefits earlier.
Start with Your Estimated Benefits
To get a sense of whether you should wait to receive Social Security benefits, start by calculating what you may receive.
The Social Security Administration bases benefits on the 35 years in when you earned the most income, up to the amount that can be taxed on Social Security payroll taxes ($137,700 in 2020).
That means you generally want to wait until you’ve had 35 years of work experience before claiming Social Security retirement benefits. If you have many years early in your career in which you didn’t earn much income, you may want to keep working, especially since you are likely to be in your prime earning years, and those wages could boost your eventual benefits.
To calculate what your work history will yield for benefits, you can use one of the calculators provided by the Social Security Administration. The calculation will estimate the amount you would receive at your full retirement age based on your current earnings record.
Understanding the Different Social Security Ages
“Full retirement age” serves as a baseline for determining your benefits. If you collect Social Security earlier than this age, your benefits will be reduced, though you gain the advantage of collecting sooner. Conversely, the longer you wait past your full retirement age, up to age 70, to claim Social Security, the more your benefits will increase due to what are known as delayed retirement credits.
Using an example from the Social Security Administration, if your full retirement age is 67 and you claim benefits at age 62, your monthly benefit will be about 30% less than if you wait until age 67. Conversely, if your full retirement age is 67 and you claim benefits at age 70, your monthly benefit will be about 24% higher.
Whatever age you start Social Security locks in your monthly benefit amount for life, other than any cost-of-living increases. So if you took Social Security at age 62 for a reduced benefit, you would not be able to claim full retirement benefits once you reached age 67.
Determining the Optimal Social Security Age
With the different benefit amounts at different ages, you’ll need to determine when to take Social Security based on factors such as your financial and personal health.
With time, you would earn more from delaying and receiving credits, as the higher monthly benefit would add up to surpass the lower monthly amount you may have started collecting at age 62.
However, if you have health conditions and a shortened life expectancy, you might want to begin your benefits at an earlier age. Similarly, if you’re in a difficult financial position in your 60s and need the income, you may find it beneficial to collect Social Security early.
In other cases, where you’re in good health and in a good financial position, you’re likely best off waiting to claim Social Security. That way, you can maximize your lifetime Social Security income.
One last planning strategy to keep in mind is that Social Security pays survivors benefits, such as to a widow or widower. If your spouse would not earn much from Social Security due to a short work history, you may want to wait until full retirement age or later to maximize your benefits. Were you to pass before your spouse, they could earn 100% of your benefit rather than the smaller benefit based on their own work record.
Consider Talking to a Financial Advisor
Ultimately, there’s no one right answer for determining the best Social Security age. While many choose to wait as long as possible to claim Social Security, your decision depends on your personal situation.
The right financial advisor can help you determine your ideal age to begin taking benefits. As a fiduciary financial planner in Plantation, FL, we work with clients to select their age in light of their overall financial situation, needs, and goals.
Schedule a complimentary consultation with a fee-only financial planner to discuss your personal situation.
This material was prepared by Kaleido Inc. from information derived from sources believed to be accurate. This information should not be construed as investment, tax or legal advice.