If you’re 62 or older, it may feel like time to start getting the government benefits you’ve paid into your entire working life. However, taking your retirement entitlement now may not be your best financial move.
The age you start getting your Social Security benefits matters. For instance, if you decide to collect as soon as you turn 62, you’ll receive a significantly reduced (by 30%) benefit for the rest of your life. If you apply for Social Security at 65, you’ll receive 13% less monthly.
But if you wait until you reach full retirement age (66 or 67, depending on your birth year), you’ll receive your full benefit amount every month. And, if you can hold out until you hit 70, you’ll lock in the highest possible payment.
You Have a Family History of Longevity
Baumhover says you should hold off on applying for benefits if “you expect to live long enough to make delaying Social Security worthwhile.” For instance, if the previous two generations of your family lived well into their 80s and you currently enjoy good health, it’s a reasonable assumption that you’ll collect that higher benefit payment for a decade or more.
You’re Married (and Earn More)
If you’ve consistently earned more than your spouse during your career, your Social Security benefit will be larger than theirs by default. But, if you delay collecting payments, you can maximize the survivor benefits you leave to them should you pass away first.
You’re Still Working
As soon as you start collecting Social Security, the Social Security Administration (SSA) views you as retired. If you’re under full retirement age (FRA) and work while getting your benefits, the SSA could reduce your monthly payment until you reach FRA.
For example, if you’re under FRA for the entire year and earn more than $21,240 in wages, the SSA will deduct one dollar for every two dollars you make over that limit. During the year you reach FRA, the SSA will deduct one dollar for every three dollars you earn over $56,520 before turning 66 or 67. Once you hit the magic age number, you can make as much as you want, and your income won’t impact your benefit amount.
You Don’t Need the Money Now
If you have other assets you can use to cover your living expenses, it literally pays to wait to collect Social Security. Delaying your benefits until age 70 guarantees the best possible cash flow for the remainder of your retirement. You should apply as soon as you reach that age, though, because there’s no additional financial gain to be had for waiting longer.
Above All Else, Hit This Milestone Before You Collect
The age you collect Social Security is a personal and nuanced decision. However, it’s in your best interest to wait to claim your benefits until you reach an important milestone: 35 years in the workforce.
The SSA determines your benefit by totaling your salary earned throughout your 35 highest-paid years and dividing that figure by 35. If you only worked 25 years, the SSA factors in 10 years’ worth of zeros, which significantly lowers your monthly payment.
Pro Tip: If you file for benefits too early, you may be able to change course. The SSA will let you withdraw or cancel your application within 12 months of benefit approval.
When Collecting Early Makes More Sense
While it can be financially advantageous to delay filing for benefits, there are several reasons why you should collect Social Security early:
- You can’t work and need the income now.
- You worry that the Social Security program will run out of money during your lifetime.
- You don’t have any dependents that would benefit from your higher payment upon your death.
- You can improve your financial situation by more than you’d lose, such as using your benefits to pay off high-interest debt or invest in appreciating assets.
- You earn less than your spouse, and they will delay filing for benefits.
Baumhover adds that your health plays a role. He says, “If you have an illness or debilitating condition that you expect will shorten your life expectancy, you may consider taking [Social Security] early.”
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