There are millions of Americans who rely on Social Security as their primary source of income during retirement. With that being said, the age at which you claim benefits may impact the how much of benefits you receive every month.
The government has recently concluded that there approximately an $800 difference between claiming benefits at the age of 62 and waiting until age 70.
That’s a big gap, and it’s one that every future retiree should understand before making any decisions.
Why Ages 62 and 70 Matter So Much
Ages 62 and 70 are two key milestones for Social Security.
- The age of 62 is the earliest age at which you can start collecting benefits.
- Age 70 is the latest age where your benefit amount keeps growing.
If you can afford to wait, it will serve you well.
Claiming at 62: The Early Start Comes with a Pay Cut
There are many people who start collecting Social Security benefits at the age of 62. The problem with this is that your benefits are permanently reduced. However, if you wait until FRA, you will receive 100% of your benefits. For those who wait till 70, will receive the maximum out of their benefits.
In plain English, that means if your FRA is 67 and you claim at 62, your monthly payment will be about 30% lower.
For example:
If you would have received $2,000 a month at age 67 and you start claiming at 62, you would only receive about $1,400.
Waiting Until 70: The Payoff for Patience
In fact, Social Security pays you for waiting if you can afford to. Your payment increases by two-thirds of one percent, or 8% annually, for each month you postpone receiving benefits over your FRA. So, if you wait until age 70, your benefit will increase by about 24%.
Using the same example:
If you claim benefits at age 62 at $1,400, waiting until age 70 would potentially increase it to approximately $2,480.
That’s an extra $800 a month compared to claiming at 62.
What That Difference Means Over Time
Even though this $800 amount may not seem like much, for those living on fixed incomes, it makes a major difference and adds up.
Many families rely on Social Security for their essential expenses such as food, rent and utilities therefore every bit counts. If possible, waiting until age 70 is the best option to ensure you receive the maximum possible benefit. The bigger check, the more total money throughout your lifetime, especially if you live into your 80s or 90s.
When Claiming Early Might Still Make Sense
Yes, waiting to claim benefits might not be the best option for everyone. There may be some people who work in physically demanding jobs and cannot work for longer or there may be people who suffer from health issues and cannot manage working for longer. In these situations, it might be beneficial to claim benefits early.
It all depends on your personal situation, your health, finances, and lifestyle.
The Bottom Line
Indeed, the age at which you claim Social Security makes a major impact on the amount of benefits you receive.
- Claiming at 62 can cut your benefit by about 30%.
- Waiting until 70 can increase it by roughly 24%.
It’s important to understand your personal circumstances before making the decision of when to retire. If it’s possible for you, wait for as long as you can to claim benefits, this will ensure you receive the maximum possible benefits.
If you require assistance with financial planning, be sure to consult with a financial advisor. Make sure you follow verified updates and information relating to Social Security and be sure to plan ahead. The end goal is a peaceful retirement, and you need to ensure that you take responsibility for your finances during retirement.