During your career, money is taken out of your paycheck as a payroll tax to fund the Social Security program, but it will ultimately become a monthly benefit to you in retirement.
However, when to retire and begin accepting Social Security payments could have a drastic effect on your payment amounts.
The best age for Social Security benefits depends on personal and financial factors, like your current cash needs, retirement plans, health and family history. Be sure you weigh the decision carefully and don’t hesitate to find a financial advisor to talk to if you have questions.
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Get StartedWhen Should You Take Social Security to Get the Full Benefit?
There are a few different ages to keep in mind when considering taking out Social Security benefits:
Age 62 is when you can officially begin accepting Social Security benefits.
Age 66 or 67 (67 for those born after 1960) is your “full retirement” age and when you’ll need to work until to qualify for the maximum monthly benefits.
Age 70 is the age the maximum Social Security retirement benefit kicks in.
That said, benefits at age 62, 66, or 67 are not your maximum benefits. If you claim before the age of 70, you’re not getting your full entitlement.
Each year after full retirement, your payout increases by a certain percentage based on specific criteria. To maximize on this strategy, we recommend considering holding off until you are 70 – if your situation allows. Payments will be the highest possible, increasing by up to 8% each year you wait. Your benefit claimed at 62 is about 30% lower than it would be at age 70.
While this strategy can help you collect the highest Social Security benefit, every situation is different. Consult a financial advisor to figure out how and when Social Security benefits should factor into your unique retirement plan.
How to Get Social Security Advice
If you’re unsure how Social Security could factor into your retirement plan, we recommend speaking with a fiduciary financial advisor. Fiduciaries are obligated by law to act in your best interest as they manage your assets or money, and any potential conflicts of interest must be disclosed.
While the value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, research suggests people who work with a financial advisor:
- Feel more at ease about their finances.
- Could end up with 15% more money to spend in retirement.1
For many,, knowing how to find a vetted fiduciary advisor is the most confusing task of all. Common Google searches related to the topic reveal a desperate search for direction. “Fiduciary financial advisors near me,” “best fiduciary financial advisor” and “financial investment advisors near me” are searched for hundreds of times per day.
Finding a fiduciary shouldn’t be that hard. Thankfully, now it isn’t.
Our free matching quiz helps Americans get matched with up to three fiduciary advisors who serve their area so they can compare and decide which advisor is right for them. All advisors on the matching platform have been rigorously screened through our proprietary due diligence process. The quiz takes just a few minutes, and in many cases you can be connected instantly with an advisor for a free initial retirement consultation.
Sources:
1. Journal of Retirement Study Winter (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.
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I understand that each year I wait the payment will go up about 8% but I also understand that each year I wait two things happen. First I have to live the long enough for the 8% increase to pay off the 100% I lost during the years I waited. Simplistic math. If I wait until 63 the I lose 100% of what I would have collected at 62 (plus the time value of having that money earlier). Doesn’t that mean I have to live until I am at least 75 to make for that lost year or 78 when accounting for the time value of money? I hope to live beyond 78 but 15 years seems like a long time to wait to break even. If I wait until 70 then doesn’t the same logic take my break even point to 85? Second I have to use other resources (earned or investment income or other retirement savings) that might bring with them significant tax impacts to pay my expenses.
If the annual amount you will get goes up by 8% every year that you skip starting to take it, then you will be giving up 100% the first year you skip. For example: You turn age 66 and your full benefit is $20,000 per year thereafter. If you do not take the $20,000 you just gave up it will take you 12.5 years to recover that lost money. 8% X $20,000 = $1,600 per year you would recover. $1,600 X 12.5 years = $20,000. You will be 76 years old before you get back all the money you gave up at age 66. If you had put all $20,000 into an interest bearing investment as if you never received it, then you have even more reason to start collecting at age 66. Make sure you point this out to anyone giving you advice.
It’s true that each person’s circumstances are different. However – if you’re still working until age 70 or beyond, there’s no point in taking your Social Security Retirement Income before age 70.
I took mine early in case I died.
I didn’t, I lost out financially but I lived.
Thank you for being somewhat neutral on this. All the people that say “wait until 70” make me crazy, because they do not add that each person’s circumstances are different and that one has to assess their financial situation to decide the best age at which to take social security. For those without a lot of savings or with all of their savings in retirement accounts, waiting until 70, forcing them to divest those savings, might actually cost them money, or the benefit of doing activities due to lack of income. For others with health issues, I’m sorry to say that they may never enjoy the benefit of that extra income.