For many older Americans, Social Security benefits can make or break retirement. Around half of married retirees depend on their benefits for at least 50% of their income, according to the Social Security Administration. And for nearly one-quarter of couples, their monthly checks make up at least 90% of their retirement income.
Social Security benefits weren't designed to be a primary source of income in retirement. But few workers are entitled to pensions, and it's becoming harder and harder to save. For those reasons, many retirees have no choice but to depend on Social Security.
If you expect that your monthly checks will make up a substantial chunk of your retirement income, it's wise to make sure you're maximizing your benefit amount. And there's one Social Security move that could potentially cost you hundreds of dollars per month.
How your age affects your benefit amount
Your benefit amount is calculated based on your wages throughout your career. The more you earn and the longer you work, the more you're eligible to receive in benefits.
However, to receive that full benefit amount, you'll need to wait until your full retirement age (FRA) to begin claiming. For anyone born in 1960 or later, your FRA is 67 years old. Those born before 1960 have an FRA of either 66 or 66 and a few months, depending on the exact year you were born.
You can begin claiming benefits before your FRA, but your benefit amount will be reduced for each month that you claim early. If you claim as early as possible at age 62, your benefit amount will be reduced by up to 30%.
Depending on how much you're entitled to receive at your FRA, claiming at 62 could result in hundreds of dollars less per month.
For example, the average retiree benefit amount in 2021 is $1,543 per month, according to the Social Security Administration. Let's say you have an FRA of 67 years old, and by claiming at that age, you'd receive $1,543 per month. If you claim at age 62, your benefit amount will be reduced by 30%, leaving you with around $1,080 per month — that's $463 less per month than you'd collect by waiting until age 67 to claim.
What age should you claim?
In theory, it shouldn't matter what age you claim. Social Security benefits are designed so that you'll likely receive roughly the same amount no matter when you claim. If you claim early, you'll receive smaller checks but more of them over a lifetime. If you delay benefits, each check will be larger, but you won't receive as many of them.
However, life doesn't always work out so perfectly. If you end up living a shorter-than-average lifespan, you may receive more money over a lifetime if you claim Social Security early. On the other hand, if you live a longer-than-average lifespan, you might earn more by delaying benefits.
Another factor to consider is how much you have in savings. Those who have a robust retirement fund may be able to afford to claim benefits early. But if you expect Social Security will be your primary source of income, it may make more sense to wait to claim so you can receive more per month.
Finally, the age you claim will depend on your priorities in retirement. If your top priority is spending as much time as possible in retirement, you may decide to retire and claim benefits early. You will receive less money each month, but that may be a worthwhile trade-off for you. Or, if your main concern is being financially secure in retirement, delaying benefits may be a smart move.
Ultimately, the age you begin claiming Social Security is up to you, and there's no right or wrong answer. Think about your lifestyle, your financial situation, and your personal preferences. By making this decision carefully, you can be sure you're setting yourself up for the best retirement possible.
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