You have considerable flexibility as to when to start receiving your Social Security retirement benefits. You may start them as early as age 62, you may wait to start them until age 70, or you may start them any year in between.
The best time to commence your Social Security checks will differ from person to person as a matter of individual circumstances and preferences. Let’s look at some of the most important factors you’ll need to take into consideration:
1. What is your life expectancy?
The earlier you start drawing benefits, the lower will be the size of your monthly checks for the rest of your life. Each year that you wait, your checks increase by about 8%.
Let’s say you would get $750 monthly checks if you started your benefits at age 62, and that you would instead get $1,320 monthly checks if you waited to start your benefits at age 70.
So think about that in terms of life expectancy. If you were to die at age 72, you’d have received either 10 years worth of $750 checks, or 2 years worth of $1,320 checks. Clearly the former is much better. On the other hand, if you were to die at age 100, you’d have received either 38 years worth of $750 checks, or 30 years worth of $1,320 checks, with the latter giving you far more total benefits.
So the longer you expect to live, all else being equal, the more of an advantage it is to wait to start receiving retirement benefits.
2. Are you going to continue working?
An important provision in the rules for Social Security is that if you start your benefits between age 62 and your “full retirement age” (currently 65, being gradually increased to 67), you will lose some of those benefits if you continue to work and make a significant amount of money.
Specifically, if you make over $14,160 in a year, half of the amount above that will be deducted from your Social Security benefits. So if you work and make, say, $19,140, then you will receive $2,500 less in Social Security benefits than you would have otherwise been entitled to.
You can see that if you’re going to be working more than very, very part time, it almost always will be better for you to wait until age 65 or whatever full retirement age is by the time you reach your 60s. Once you’re at full retirement age, you will not lose benefits regardless of your work income.
3. At what age will you be able to get more out of the money you’ll receive from Social Security?
Maybe you can tighten your belt a little in your 60s and 70s, so that you’ll be in better shape, with bigger monthly Social Security benefit checks in your 80s and 90s. But is that a good tradeoff for you? Do you expect to be mentally and physically able to enjoy the things you could spend that extra money on when you’re that old? Do you have no urgent need for your benefits in your 60s because you have plenty of money to support yourself without dipping into your Social Security? Will you likely have no need for your Social Security benefits at any point, and so would just as soon arrange it so you get the maximum possible benefits to leave to your heirs?
Only you can anticipate when you’ll most need or be able to use your benefits.
4. If you don’t start your Social Security early, what other assets might you have to use to support yourself?
Let’s say you have your money tied up in investments that have a high annual rate of return, but will penalize you if you cash them in any time soon. Clearly there will be a significant cost to you if you use those assets now, when you could instead have started your Social Security benefits early.
So it’s true that your eventual Social Security benefits are increasing the longer you hold off commencing them, but it still may be worth starting your benefits early if your other assets that you would otherwise have to dip into are increasing in value even more so.
These and other considerations that are specific to you and your situation will determine when you should start your Social Security retirement benefits.
Thomas M. Dalton, “Retirement at 62: Is Receiving Social Security Early Worth It?” The CPA Journal.
Eva Rosenberg, “Taking Social Security Early Can Be Expensive.” Wall Street Journal.
Jeanne Sahadi, “A Retirement Mistake Boomers Should Avoid.” CNN Money.
“How Work Affects Your Benefits.” Social Security Online.
“Retirement Benefits by Year of Birth.” Social Security Online.
“When to Start Receiving Benefits.” Social Security Online.