Social Security is one of the major components of a successful retirement plan. This benefit is not likely to fund a comfortable retirement on its own. However, it can provide a nice supplement to other retirement options. Americans can apply for their Social Security benefits at any age between 62 and 70, and this causes many people to wonder when to claim their benefits.
Retirees can start to take their Social Security at age 62. This is actually considered early retirement, and the government will cut benefits by 30% for those who start drawing them at this age. Full retirement age varies based upon the year of a person’s birth. Those born between 1943 and 1954 can earn the full benefit beginning at age 66. This age increases by two months for those born in each year between 1955 and 1960. Those born in 1960 have a full retirement age of 67, and this is the same full retirement age for anyone born after 1960.
Those who wait to draw Social Security until age 70 will see an increase in their benefit levels. This will add 24% to their total payout each month when compared to those who file at their full retirement age. Overall, a person who decides to file at age 62 could lose more than half of the maximum payment they might receive each month.
When To File
When looking at the increased payments for those who wait until age 70 to draw Social Security, it might seem that this is the best time to claim benefits. However, those who have a sizable nest egg might want to start drawing as soon as possible. Those who do not file before they die will not earn a penny. Therefore, it can make sense to enjoy the extra money even if it’s not needed. Also, those who have health issues might that necessitate retirement might need the money on short notice. On the other hand, those who are healthy and enjoy their work might want to hold off on filing until the last possible minute to maximize their monthly payouts. Personal finance is personal. Therefore, it’s a good idea to weigh the pros and cons before deciding when to file.