Deciding when to start Social Security benefits is a crucial choice that can significantly affect your retirement finances. Social Security provides reliable, inflation-adjusted income, serving as a strong foundation for many retirement plans. The timing of when you claim these benefits can either maximize your retirement income or limit it, depending on your approach.
FRA
Your Full Retirement Age (FRA) marks the point at which you’re eligible to receive your full Social Security benefit amount. While the FRA used to be 65, it has gradually increased to 67 for most people born after 1960. However, you can start receiving benefits as early as age 62 or delay until age 70. Here’s a breakdown of how different ages affect your benefits:
- Starting at 62: Claiming early can reduce your monthly benefit by as much as 30%, meaning a lower lifetime income.
- Delaying until 70: Each year you wait after your FRA adds about 8% to your monthly benefit, thanks to “retirement credits.” Waiting can mean a larger income, potentially making a big difference over time.
Waiting to claim Social Security can increase your monthly payment and provide a more substantial income throughout retirement, so if you can afford to delay, it may be worth considering.
Reconsideration
Once you start claiming benefits, you still have some flexibility if you change your mind. If you started benefits early but want to delay, there are a few options:
- Withdraw and Repay: Within the first year, you can withdraw your claim and repay the benefits you’ve received, resetting your start date. This allows you to restart at a later date.
- Claim-Suspend-Restart (CSR): For those beyond the one-year window, the CSR strategy can help. At your FRA, you can suspend payments, allowing your benefits to grow with additional retirement credits for up to three years. After that, you can restart benefits with a higher monthly payment.
This flexibility can be a significant advantage, especially for those who realize later that they could benefit from delaying their benefits for a larger payout.
Early Claims
Despite the advantages of waiting, many people still choose to start their Social Security benefits at 62. Approximately 27% of people begin their benefits early, often due to specific financial or personal needs:
| Reason | Explanation |
|---|---|
| Health Concerns | Shorter life expectancy can make early benefits seem more practical. |
| Unplanned Early Retirement | Layoffs or health issues can lead to early retirement, requiring income sooner. |
| Lack of Emergency Savings | Without emergency funds, early benefits can provide much-needed cash flow. |
| Healthcare Costs | Some use early benefits as a financial bridge until Medicare eligibility at age 65. |
| Young Dependents | If you have minor children, claiming early enables them to receive benefits, too. |
| Investment Opportunities | Some prefer to claim early and invest the income for potentially higher returns. |
| Concerns About Solvency | Many worry that Social Security funds may run out and choose to claim benefits sooner. |
| Caregiving Responsibilities | Leaving work to care for a family member may prompt early benefits for immediate income. |
These factors make an early claim appealing for many, but if you’re in good health and financially stable, delaying Social Security until age 70 can provide the highest lifetime benefit, offering a larger buffer against inflation and financial instability.
Strategy
When to claim Social Security is a highly personal choice based on several factors:
- Health: If you expect a longer lifespan, waiting until age 70 can help you maximize your benefits.
- Financial Stability: If you have other sources of retirement income, delaying Social Security can lead to a more considerable guaranteed income.
- Lifestyle Preferences: For those who continue working or have other financial flexibility, postponing benefits may be advantageous.
The flexibility Social Security offers allows you to adapt your claiming strategy if your needs change over time. With careful planning, you can align your decision with your financial goals and retirement lifestyle.
Ultimately, considering your unique health status, financial picture, and long-term goals will help you choose a claiming strategy that best supports your desired retirement.
FAQs
What is Full Retirement Age (FRA)?
FRA is when you can claim full Social Security benefits without reduction.
Can I delay Social Security beyond FRA?
Yes, you can delay until 70, increasing your benefits each year.
Can I change my mind after claiming Social Security?
Yes, within one year, you can withdraw your claim and repay benefits.
Why do people claim Social Security at 62?
Many claim early due to health, financial needs, or job loss.
What is the Claim-Suspend-Restart strategy?
It allows benefit suspension at FRA for higher payments later.
