For many Americans approaching retirement, deciding when to begin collecting Social Security benefits is one of the most important financial decisions they'll make.
Should you claim benefits as early as age 62? Wait until your full retirement age? Or delay until age 70 to receive a larger monthly payment?
The answer isn't necessarily the same for everyone.
Your health, retirement income needs, marital status, and anticipated longevity can all influence which claiming strategy makes the most sense for your situation.
While claiming Social Security early allows you to begin receiving payments sooner, delaying benefits can permanently increase your monthly retirement benefit.
Understanding these trade-offs is an important part of developing a comprehensive retirement income strategy.
At What Age Can You Claim Social Security?
Most eligible individuals can begin receiving Social Security retirement benefits as early as age 62.
However, the age at which you begin collecting benefits directly affects the amount you receive each month.
The Social Security Administration (SSA) uses a concept called full retirement age (FRA), which is the age at which you become eligible to receive your full, unreduced retirement benefit based on your earnings record.
Your full retirement age depends on the year you were born.
Full Retirement Age by Birth Year:
Born between 1943 and 1954: Age 66
Born in 1955: Age 66 and 2 months
Born in 1956: Age 66 and 4 months
Born in 1957: Age 66 and 6 months
Born in 1958: Age 66 and 8 months
Born in 1959: Age 66 and 10 months
Born in 1960 or later: Age 67
Special age-attainment rules apply to individuals born on January 1.
For individuals born in 1960 or later, full retirement age is 67.
You can generally claim retirement benefits before or after this age, but doing so will change your monthly benefit amount.
Claiming Social Security at Age 62: The Trade-Off
One of the most appealing aspects of claiming Social Security at age 62 is the ability to begin receiving retirement income earlier.
For someone who retires before full retirement age, Social Security benefits may help cover living expenses and reduce the amount of money that needs to be withdrawn from personal savings and investments.
However, claiming early comes at a cost.
When you begin receiving retirement benefits before your full retirement age, the SSA reduces your monthly benefit based on the number of months remaining until FRA.
For individuals whose full retirement age is 67, claiming at exactly age 62 results in a 30% reduction from their full retirement benefit.
For example, suppose you're eligible to receive $2,000 per month at your full retirement age of 67.
If you begin collecting at age 62, your monthly benefit would be reduced to $1,400.
That's a difference of $600 per month, or $7,200 annually.
Importantly, this reduction generally continues throughout retirement. Your benefit may still increase through Social Security's annual cost-of-living adjustments, but reaching full retirement age does not automatically eliminate the early claiming reduction.
Claiming early may nevertheless be appropriate for individuals who need the income sooner, have concerns about longevity, or prefer to preserve other retirement assets.
Waiting Until Full Retirement Age
Waiting until your full retirement age allows you to receive 100% of your primary insurance amount (PIA), which is the benefit calculated from your covered earnings record before adjustments for early or delayed claiming.
For someone born in 1960 or later, that means waiting until age 67.
Using our previous example, an individual with a $2,000 monthly benefit at full retirement age would receive the full $2,000 by claiming at 67.
Compared with claiming at 62, this results in a higher monthly benefit.
However, waiting also means forgoing several years of Social Security payments.
For retirees with adequate savings or other income sources, waiting until FRA may be a reasonable middle ground between claiming early and delaying benefits further.
It provides a larger monthly benefit than claiming at 62 without requiring you to wait until age 70.
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Delaying Social Security Until Age 70
While many retirees focus on whether to claim at 62 or full retirement age, another option is to delay collecting benefits until age 70.
Under Social Security rules, eligible individuals can earn delayed retirement credits for postponing retirement benefits beyond full retirement age.
For individuals born in 1943 or later, these credits increase retirement benefits at a rate of 8% per year, calculated monthly, for eligible months of delay after FRA and before age 70.
For someone with a full retirement age of 67, waiting until age 70 increases their monthly benefit to 124% of their PIA.
How Claiming Age Affects Your Social Security Benefits
Assume your full retirement age is 67 and your monthly Social Security benefit at that age is $2,000.
Claiming at Age 62
Monthly benefit: $1,400
Annual benefit: $16,800
Reduction from full retirement benefit: 30%
Claiming at Age 67
Monthly benefit: $2,000
Annual benefit: $24,000
Percentage of full retirement benefit: 100%
Claiming at Age 70
Monthly benefit: $2,480
Annual benefit: $29,760
Increase over full retirement benefit: 24%
These figures are illustrative and exclude future cost-of-living adjustments, additional earnings-related benefit changes, and other individual adjustments.
In this example, delaying until age 70 produces a monthly benefit that's $1,080 higher than claiming at age 62.
That's $12,960 more in annual benefits.
However, delaying also means giving up the payments you could have received during your 60s.
Another important consideration is that delayed retirement credits stop accumulating at age 70. There is generally no advantage to postponing an eligible retirement benefit beyond age 70 for the purpose of earning additional delayed retirement credits.
Understanding Your Social Security Break-Even Age
One of the most useful ways to compare Social Security claiming strategies is through a break-even analysis.
A break-even analysis examines the age at which the cumulative benefits received under one claiming strategy equal or exceed those received under another.
For example, someone who claims at 62 will begin collecting payments years before someone who waits until 70.
Initially, the individual who claims at 62 will have received more total Social Security income.
However, the individual who delays until 70 will receive a larger monthly benefit once payments begin.
Over time, those larger payments may allow the delayed claimant's cumulative benefits to catch up with and eventually surpass the total received by the earlier claimant.
The age at which this occurs is commonly referred to as the break-even age.
There is no single break-even age that applies to every retiree.
The results depend on the claiming ages being compared, benefit amounts, assumptions about future cost-of-living adjustments, and the treatment of other financial factors.
A simple cumulative benefit comparison also does not necessarily account for investment returns, taxes, or the opportunity cost of using personal savings while delaying Social Security.
For this reason, break-even analysis is best viewed as one component of a broader retirement planning process rather than the sole factor driving a claiming decision.
How Life Expectancy Affects Your Decision
Your anticipated longevity is another important consideration when determining when to claim Social Security.
Because delaying benefits increases your monthly payment, individuals who live longer may receive more cumulative lifetime benefits by waiting to claim.
Conversely, individuals with shorter lifespans may receive more cumulative benefits by claiming earlier.
Of course, no one knows exactly how long they'll live.
That's why it's important to evaluate multiple longevity scenarios rather than assuming a single life expectancy.
For example, a retirement plan might examine how claiming at 62, full retirement age, or 70 affects cumulative benefits if an individual lives to age 75, 85, or 95.
These scenarios can help illustrate the trade-offs between receiving income sooner and securing a larger monthly benefit later.
Ultimately, the decision should consider both your anticipated longevity and your financial ability to delay receiving benefits.
Married Couples: Why Social Security Claiming Decisions Should Be Coordinated
For married couples, Social Security claiming decisions can be more complex.
In addition to each spouse's individual retirement benefit, Social Security provides certain spousal and survivor benefits.
These rules create additional considerations that may influence when each spouse chooses to claim.
Spousal Benefits
An eligible spouse may qualify for benefits based on the other spouse's earnings record.
At full retirement age, the maximum unreduced spousal benefit is generally equal to 50% of the worker's primary insurance amount, subject to applicable rules.
However, claiming spousal benefits before full retirement age can result in a reduction.
For individuals eligible for both their own retirement benefit and a spousal benefit, SSA's deemed filing rules generally require them to be treated as applying for both benefits when they file, subject to applicable exceptions.
Additionally, delayed retirement credits earned by the higher-earning spouse do not increase the maximum regular spousal benefit, which is generally based on the worker's PIA.
These distinctions are important when coordinating benefits between spouses.
Survivor Benefits
Survivor benefits introduce another important consideration.
When one spouse passes away, the surviving spouse may be eligible for benefits based on the deceased spouse's earnings record.
The amount depends on several factors, including the deceased worker's benefit, the survivor's age when claiming, and applicable Social Security rules.
In certain circumstances, delayed retirement credits earned by the deceased worker can increase the benefit available to an eligible surviving spouse.
This means that delaying Social Security may provide value beyond the higher monthly payment received during the worker's lifetime.
For married couples, particularly those with substantially different earnings histories, evaluating survivor benefits can be an important part of choosing a claiming strategy.
Can You Work While Collecting Social Security?
Yes. You can work while receiving Social Security retirement benefits.
However, if you begin collecting benefits before reaching full retirement age, your earnings may affect how much Social Security pays you.
The SSA applies a retirement earnings test to beneficiaries who are below full retirement age.
If your earnings exceed the applicable annual limit, some benefits may be withheld.
The earnings test generally considers wages from employment and net earnings from self-employment, rather than investment income, pensions, or interest.
Beginning with the month you reach full retirement age, the retirement earnings test no longer applies.
Importantly, benefits withheld because of the earnings test are not necessarily permanently lost.
When you reach full retirement age, SSA recalculates your benefit to account for months in which benefits were withheld due to excess earnings.
For individuals planning to continue working during their early 60s, these rules should be considered before deciding when to begin collecting retirement benefits.
Factors to Consider Before Claiming Social Security
Although the monthly benefit amount is important, it shouldn't be the only factor influencing your decision.
A comprehensive claiming analysis should consider your broader financial circumstances.
Your retirement date: Someone retiring at 62 may have different income needs than someone planning to work until 70.
Your retirement savings: Individuals with sufficient retirement assets may have greater flexibility to delay Social Security, while others may benefit from receiving income sooner.
Your health and longevity: Anticipated lifespan can significantly influence the cumulative benefits received under different claiming strategies.
Your marital status: Spousal and survivor benefits can make coordinated claiming decisions particularly important for married couples.
Your other retirement income: Pensions, investment withdrawals, and other income sources may influence your ability to delay benefits.
Your retirement spending needs: The timing and amount of your anticipated expenses can affect which claiming strategy best supports your financial plan.
Rather than evaluating Social Security as an isolated decision, consider how it fits into your overall retirement income strategy.
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Final Thoughts: Choosing the Right Time to Claim Social Security
Deciding when to claim Social Security is about more than simply choosing the age that provides the largest monthly payment.
Claiming early provides income sooner, while delaying can produce a larger monthly benefit for the remainder of your life.
For married couples, the decision may also affect the benefits available to a surviving spouse.
There is no universal claiming age that is appropriate for everyone.
The right strategy depends on your retirement goals, financial resources, anticipated longevity, and overall income needs.
At Morrissey Wealth Management, we believe Social Security claiming decisions should be evaluated as part of a comprehensive retirement income plan.
By comparing multiple claiming ages and considering how Social Security interacts with your other retirement resources, you can make a more informed decision about when to begin collecting benefits.
If you're approaching retirement, working with a financial planner can help you evaluate your Social Security options and develop a retirement income strategy aligned with your long-term goals.
As always have a wonderful day,
a better weekend,
and I look forward to writing to you next Friday!
Written by Ryan Morrissey CFP®, CLU®, CHFC®, CMFC
Founder & Principal Advisor of Morrissey Wealth Management
Host of the Retire with Ryan Podcast