When Is the Right Time to Claim Social Security Benefits?

Selecting the right time to begin Social Security benefits is a personal matter. Only you know what makes sense for your family. But you should keep in mind some key points when you make this critical choice:

• Make sure that you know when you qualify for full benefits, but remember, you have broad discretion about when to claim. Refer to the table.

• Know your benefit. By using the Social Security retirement calculators, you can quickly get an idea of the benefit you’d receive before, at, and after your full retirement age. Each year you wait to collect beyond your full retirement age will add 8 percent to your benefit. Each year you begin collecting before your full retirement age will reduce it between 5 percent and 7 percent. In other words, the earlier you retire, the less Social Security you get each month. For many people, that’s a powerful argument to hold off claiming benefits.

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• Be realistic about your life expectancy. If you don’t like to think about how long you’ll live, get over it. Your life expectancy, and the possibility that you may exceed it, should be factors when you make plans for Social Security and retirement in general. Of course, no one knows how long you’ll live. But there’s plenty to consider:
  • Do people in your family tend to live long?
  • How would you grade your own lifestyle in terms of fitness, exercise, diet, and other personal habits that affect health?
  • How healthy are you? Do you suffer from a chronic condition that is likely to shorten your life?
  • Do you have a lot of stress? If so, do you have ways of managing that stress that make you feel better?
  • Do you lug around a lot of anger and worry? If so, can you do anything about it?
• Think about all your sources of income and your expenses. Consider your savings, including pensions, 401(k)s, IRAs, and any other investments. Make realistic calculations about how much money you need. Look at several months of statements from your checking account and credit cards to review what you spend on and look for waste, while you’re at it. Ask yourself: Do you have the option to keep on working? Are you physically up to it?
• Think about your spouse. If you die first, it could determine how much your spouse gets for the rest of his or her life. Consider your spouse’s life expectancy and financial resources. Does he or she have a chance of living for many more years? If so, what are the household finances (beyond Social Security) to support a long life? Does the spouse have health issues that could cost a lot of money in the future? Husbands should bear in mind that wives typically outlast them by several years, because wives are typically a few years younger and because women have a longer life expectancy than men. Is that the case in your marriage?
• Talk it out if necessary. Couples should discuss this topic together, even though, in many marriages, one person may be the one who makes most of the financial decisions. You also may want to discuss your finances with a financial planner, especially if you’ve built up a nest egg and you have questions about how Social Security income will fit in.
• Be clear on the trade-offs. You can choose between a smaller amount sooner or a bigger amount later. It often makes sense to talk with a financial advisor, especially if you have investments to help support your lifestyle in retirement. Your decision about when to start retirement benefits will affect your family income for the rest of your life.

Experts agree that it is often unwise to claim Social Security retirement benefits as soon as possible (age 62). But that is not always the case. Early claims may make sense for individuals who need the income for necessities and lack other financial resources to pay for them or who do not expect to live much longer.

Social Security becomes more important the older you get

But you do have some influence over the size of your Social Security benefit, based on when you claim it. This matters for a little-recognized reason: The older you become, the more likely you are to depend on Social Security.

The more years pass, the more you need Social Security’s protection against inflation, known as the cost-of-living adjustment. This provision is a big deal (even if the adjustment is small some years) because the effect of inflation over time can be drastic. At a rate of 3 percent inflation, the buying power of unprotected income plunges by half over a 20-year period. Even if you’re fortunate enough to get a private pension, it’s probably not shielded against inflation, and rising prices erode it over time.

Other resources can boost your retirement security but are far from a sure thing. Earnings from even part-time work may go a long way. But work may become undesirable or physically difficult in later years. Older Americans have the highest rates of home ownership. But older people still may have mortgages and other debts to consider — their debt levels have actually risen over the years.

Social Security benefits compare favorably with many other sources of income, because they’re protected partially from taxation. Most seniors don’t have to pay a penny on their benefits. Even the most affluent pay income taxes on 85 percent of their benefits, not 100 percent.

A 2019 report by the Economic Policy Institute found that nearly half of working families have no savings at all. Findings like that help explain why so many people are afraid they’ll last longer than their money does. If their fears are borne out, Social Security will play a critical role in filling the vacuum.