There are a few different factors that determine your Social Security benefit, including how many years you've worked and how much you earned in your 35 highest-earning years. However, the factor that is most in your control as you approach retirement is the age at which you start collecting your benefits.
Most U.S. workers can choose to start their Social Security benefits as early as age 62 or as late as age 70. Of course, it isn't practical (or necessary) for everyone to wait until the last possible minute, but you might be surprised at how much of a difference your claiming age can make. In fact, if you're a lifelong high earner, waiting until age 70 can get you an extra $1,983 per Social Security check, or nearly $24,000 in extra inflation-protected income every year.
With that in mind, here's how your claiming age affects your benefits and why you might want to think twice before claiming early.
Image source: Getty Images.
What is your full retirement age?
For Social Security purposes, full retirement age is the age at which you are entitled to your full Social Security benefit as calculated by the benefit formula in place when you become eligible. Or in simple terms, it's the age your benefit won't be reduced for claiming early or increased for claiming late.
For most American workers, full retirement age is currently set at 67 years old. This is the full retirement age (FRA) for workers born in 1960 or later. If your birth year is before 1960, your full retirement age is slightly earlier.
|
Birth Year |
Full Retirement Age |
|---|---|
|
1960 or later |
67 years |
|
1959 |
66 years, 10 months |
|
1958 |
66 years, 8 months |
|
1957 |
66 years, 6 months |
|
1956 |
66 years, 4 months |
|
1955 |
66 years, 2 months |
|
1954 |
66 years |
Data source: SSA.
How does your claiming age affect your benefits?
To illustrate how this works, let's consider an example. We'll say that your full retirement age is 67, and that your primary insurance amount (the benefit you'd get if you claimed at your full retirement age) is $2,000 per month. Here's how various claiming ages would impact your Social Security benefit.
|
Claiming Age |
Difference From FRA |
Impact on $2,000 Primary Insurance Amount |
|---|---|---|
|
62 |
-30% |
$1,400 |
|
63 |
-25% |
$1,500 |
|
64 |
-20% |
$1,600 |
|
65 |
-13.3% |
$1,733 |
|
66 |
-6.7% |
$1,867 |
|
67 |
N/A |
$2,000 |
|
68 |
+8% |
$2,160 |
|
69 |
+16% |
$2,320 |
|
70 |
+24% |
$2,480 |
Data sources: SSA and author's own calculations.
Here's the key takeaway. The difference between claiming early and late can be a massive one, especially if you have been a relatively high earner throughout your career. In fact, the maximum possible Social Security benefit at age 62 is $2,572. If you wait until age 70, your monthly checks can be as high as $4,555 if you max out your Social Security taxable earnings throughout your career. That's a difference of $1,983 per month --or $23,796 per year in additional inflation-protected retirement income.
The bottom line on Social Security claiming age
To be perfectly clear, the point of all this isn't to say that you should necessarily wait until 70 to claim Social Security, but rather to highlight the massive difference waiting a little longer can make. Even waiting a few months longer than you had planned can make a significant difference in your retirement income stream, so keep this in mind as you approach retirement.
