You’ve paid into Social Security your entire career. So, when exactly will you be able to start benefiting from this system? In other words, when should you start claiming Social Security? It turns out that the answer to this question is different for everyone, and there’s a number of important considerations you’ll want to think about before making the decision. Before you start planning to retire, take a look through this introductory guide to learn more about what your options — and their related earnings — could look like.
What Is Social Security?
Social Security was designed to create financial security for America’s retirees. It was originally drafted as part of President Franklin Delano Roosevelt’s New Deal to lift the U.S. economy out of the Great Depression. Since then, the program has been a hallmark of the American financial system. It has become a resource that many Americans rely on for maintaining financial security into old age.
Social Security provides a source of income for individuals who have reached the age of retirement, which is commonly set at 65, although the full retirement age can vary depending on the year of birth. Retirees receive a monthly monetary benefit based on their earnings history and the age at which they choose to start receiving benefits. Delaying the start of benefits can result in higher monthly payments.
Eligibility for Social Security
Age is the primary consideration for determining when you can start claiming your Social Security benefits. Americans become eligible to start claiming Social Security at 62, which is considered the beginning of retirement age. However, just because you’re eligible to claim benefits at this age doesn’t mean that you’re required to or that it necessarily makes the most sense for your financial situation. In general, the earlier you claim Social Security, the lower your monthly payments will be.
Retirees who start claiming Social Security benefits at age 62 receive about 70% of the total benefits they’d get if they were to start claiming at full retirement age. Who should claim Social Security at 62, then? If you’re unable to work to support yourself, retiring at this age can make sense. Additionally, if you have other sources of income that allow you to live comfortably and you’re ready to leave the workforce, claiming at age 62 may be the right decision for you. Otherwise, waiting until full retirement age can allow you to collect more per month, which is something to keep in mind.
Claiming Social Security at Full Retirement Age
According to the Social Security Administration, the full retirement age in the United States is 66. At this point, you’re eligible to collect 100% of your Social Security benefits for the remainder of your life. Waiting until 66 to claim will ensure that you’re receiving the maximum standard benefits available to you. However, delaying your claim until after age 66 also means that you can accept more than 100% of your benefits.
If you wait until you’re 70 to retire, you’ll be able to collect more than your maximum Social Security benefits claim. This option can be ideal for those who plan to either work until 70. Waiting until age 70 means that you’ll be eligible for the highest maximum benefit for the remainder of your life. In this way, you may be able to live more comfortably during your golden years.
Did you know that you can also claim Social Security benefits while working? In 2023, workers under the full retirement age can earn up to $21,240 per year without it affecting their benefits. However, every $2 earned above that limit results in $1 deducted from Social Security benefits.
Other Considerations for Claiming Social Security
There are three primary topics to consider before making decisions about your Social Security claim. The first is your work situation. Are you gainfully employed and willing or able to work until the full retirement age of 66? If so, retiring at 66 or later means that you’ll get the maximum benefits payout.
Your current and anticipated cash flow in retirement are other important considerations. Do you have enough cash, savings, or investments to support yourself with a lower Social Security supplement payment? If so, you might decide to retire earlier than full retirement age.
It’s uncomfortable and difficult to think about the end of your life. But it’s important when making considerations for retirement benefits. If you expect to surpass the average life expectancy in the U.S., then delaying your benefits may be a wise move so that you can obtain the maximum monthly payment. On the other hand, if you don’t anticipate a higher life expectancy due to health concerns or other reasons, then maximizing your time here and now may be your priority.
There’s no hard and fast rule for when you should start claiming Social Security. Claiming Social Security benefits has to do with factors that impact your life personally. These include your work situation, your savings at retirement, and your willingness to delay benefits to receive the maximum payout. Consider discussing your options with a financial advisor who can help you determine the right choice based on your lifestyle factors and goals.
Resource Links
“Fast Facts & Figures About Social Security” via the Social Security Administration
“Delayed Benefits” via the Social Security Administration
“A Guide on Taking Social Security” via Charles Schwab