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In the United States, Social Security acts as a support system for the elderly. It serves to supplement retirement income, therefore the best time to claim Social Security is when you reach retirement age. While in the workforce, you contribute monthly to this program. Once retired, you can begin collecting your social security payment. These payments continue for the rest of your life. However, your monthly payment depends on when you start claiming benefits.
Deciding when it’s best to begin claiming Social Security benefits is a big decision, as it will affect your monthly payout for the rest of your life. There is no best, or one size fits all answer. General advice encourages waiting until you are at least of full retirement age, which is 66 to 67 years old. However, you can begin collecting as early as 62. There are many factors to consider, and waiting is not the best option for everyone.
Benefits can be claimed as early as 62 years old. In certain circumstances, claiming early as opposed to later makes the most sense. Two primary factors lend to claiming benefits before full retirement age:
- Finances: If you are financially stable without your benefit, it is probably best to wait. On the other hand, if you are struggling financially, claiming Social Security benefits early may be the best option.
- Health: Looking at your health to estimate life expectancy may feel uncomfortable. However, when it comes to deciding on Social Security, it can be a significant contributing factor. While there is no way to be certain about our lifespan, we can make an educated guess based on our health status. An individual who is active and in good health may very well live longer than the average lifespan. In contrast, an individual in poor health will likely have a shorter lifespan and claiming early may be the better option. If your lifespan is shorter than average, you may collect more benefits cumulatively throughout your life, even though the monthly payment amount is lower. The monthly benefit can also help offset the cost of medical expenses.
Claiming at Full Retirement Age (FRA)
You become eligible to receive maximum Social Security benefits once you hit full retirement age. It’s important to note that full retirement age used to be 65 years old. However, the Social Security Administration amended the original rule due to the increased average life expectancy. Depending on your birth year, you will reach full retirement age somewhere between 66 and 67. Full retirement age in relation to birth year is as follows.
- 1943-1954: 66 years
- 1955 – 66 years & 2 months
- 1956 – 66 years & 4 months
- 1957 – 66 years & 6 months
- 1958 – 66 years & 8 months
- 1959 – 66 years & 10 months
- 1960 or later– 67 years
Unless your life expectancy is predicted to be shorter than average or you need to claim benefits for financial stability, it is almost always better to wait until you at least hit full retirement age.
If you opt to receive benefits early, your monthly amount will be reduced by 25-30% for the entirety of the time you receive Social Security. But, if you postpone collecting beyond your full retirement age, the monthly amount will continue to increase with each postponed month. At 70 years old, you reach your maximum benefit, and your monthly check will be 132% of the full retirement benefit.
Understanding when it’s best to collect Social Security is highly individualized and complex. Many factors may affect this decision. Speaking with a financial advisor or elder law attorney can provide much guidance and help you maximize your benefits. For assistance, please contact our office at (212) 920-6371. We can help you better understand your Social Security benefits.