When determining the optimal time to claim Social Security, most individuals strive to maximize their retirement income. However, despite the potential for higher benefits, the majority of individuals claim their benefits before turning 70.
According to the Social Security Administration (SSA), less than 10% of the roughly 3.4 million people who began receiving retirement benefits in 2022 were at least 70 years old, the age at which one can receive the highest monthly payment. The average age for claiming benefits was around 65, with nearly a quarter claiming at 62, the earliest eligibility age.
While this trend represents a decline from previous years when more than half of beneficiaries started at 62, many are still potentially missing out on larger payments. Claiming at 70 can result in a benefit as much as 77% larger than claiming at 62.
Why Do People Claim Early?
Many individuals claim Social Security early because they believe they’ve earned it and deserve it. Alexander Joyce, president and CEO of ReJoyce Financial in Carmel, Indiana, notes that even high-net-worth individuals struggle with this decision at 62, often opting to take the benefit even if they don’t immediately need it.
Financial planners generally advise delaying the claim as long as possible to secure the largest monthly benefit. Your payment is based on your lifetime earnings history, and you receive 100% of the calculated amount if you claim at full retirement age (currently between 66 and 67). Claiming earlier results in a reduced payment for life, while waiting past full retirement age permanently increases your benefit.
However, the decision isn’t solely about maximizing monthly checks. Health, family, and financial circumstances also play a role in the decision-making process. It’s important to consider these factors and plan accordingly.
Reasons to Claim Early:
- Poor Health: If you have a chronic medical condition and don’t expect to live long enough to reach the break-even point, claiming early can provide more benefits, especially for single individuals without surviving spouses to consider.
- Need to Stop Working: Physically taxing or hazardous working conditions may force some individuals to retire early and rely on Social Security for income.
- Maximize Family Benefits: For married individuals, claiming early can strategically increase household benefits, particularly if one spouse has a significantly lower benefit than the other.
Reasons to Wait Until 70:
- Longevity: If you’re in good health and expect to live beyond the break-even point, waiting can result in more cumulative lifetime benefits.
- Other Sources of Income: If you have other sources of income, such as a pension or investments, waiting to claim can maximize your guaranteed income later in retirement.
- Maximize Survivor Benefits: Delaying the claim can result in a higher survivor benefit for your spouse after you pass away, providing greater financial security.
In conclusion, the decision of when to claim Social Security benefits is complex and should be based on individual circumstances. It’s important to consider all factors and possibly consult a financial advisor to make an informed decision.
-Nguyễn Bách Khoa-