If you were born between 1965 and 1980, you’re referred to as Generation X. The oldest Gen Xers are turning 60 this year and this means that retirement is looming. Therefore, it’s time to make important financial decisions, and the biggest one of all is when to claim Social Security.
Even though this may sound like a simple decision, deciding when to collect benefits is extremely important as it will cost you thousands of dollars.
Why Social Security Matters for Gen X
There are many Baby Boomers who have pensions to rely on. Gen X on the other hand, have to rely on other savings such as 401(k)s, IRAs, and personal savings. But not everyone has saved enough, and rising costs for housing, food, and healthcare make things even harder.
For this reason, Social Security is so important to Gen X retirees. Social Security may make up half or sometimes even more than half of their retirement income. Therefore, deciding when to collect benefits is important.
The Ages That Matter Most
Here’s a quick breakdown of when you can start collecting and what it means:
- Age 62: This is the earliest age that you can start claiming benefits but be sure to remember that your monthly benefit will be permanently reduced if you collect early.
- Full Retirement Age (FRA) (66–67): The FRA is the age where you are able to claim 100% of your benefits.
- Age 70: If possible, waiting till age 70 will ensure that you get the maximum out of your benefits as your benefits grow each year after you reach FRA. That means much larger checks for the rest of your life.
The Case for Claiming Early
There are some people who have no choice but to claim benefits at 62. For example, if you lost your job or are experiencing health problems, claiming benefits early might be the best option for you.
The trade-off is that your monthly checks will be smaller forever. That might not seem like a big deal at first, but over 20 or 30 years of retirement, it adds up.
The Case for Waiting
If you are able to wait until FRA or even until age 70, this could be one of the best financial decisions that you could make.
You may raise your monthly benefit by up to 76% if you wait until you are 70 years old instead of claiming at age 62. That amounts to hundreds of dollars more each month, money that might mean the difference between barely making ends meet and living comfortably.
Steps Gen X Should Take Now
- Check your benefits. Utilise the tools on the Social Security website to check how much you will receive at different ages.
- Factor in all aspects of your finances. Remember, Social Security is only one part of retirement income, be sure to consider other savings and investments.
- Think about your health and family history.
- Coordinate with a spouse and see how to maximize your benefits as a married couple.
- If you require financial assistance, consider speaking to a financial advisor to assist you in making decisions.
The Bottom Line
There are millions who rely on Social Security as an integral part of financial planning. The decision when to claim benefits can majorly impact the amount of benefits that you receive. Even though taking benefits earlier might ease the financial burden you experience now, your benefits will be decreased permanently. Therefore, where possible, wait until FRA or at least till age 70 to claim benefits. This will ensure that you receive the maximum out of your allocated benefits.