Social Statistics Indicate: The Optimal Age for Filing for Social Security Benefits
If you're approaching retirement, you might be wondering when to start claiming your Social Security benefits. This is a question many Americans grapple with, and unfortunately, a majority make the wrong decision. A study conducted by a non-partisan economic research organization reveals that the ideal age to collect Social Security benefits is often 70. Yet, less than 10% of beneficiaries follow this advice.[1]
Let's dive into the details.
Your Full Retirement Age (FRA)
Your FRA, also known as the Normal Retirement Age (NRA), varies based on your birth year. For those born in 1960 or later, your FRA is 67. For those born earlier, it ranges from 66 to 67.[1]
Early or Late Claiming
You can choose to claim as early as 62, but there's a penalty. You'll lose 5/9 of 1% for every month before your FRA, up to 30% of your intended benefit.[1] On the flip side, if you wait beyond your FRA, you'll earn a bonus. For each month you wait, your benefit will grow by 2/3 of 1%, or 8% annually.[1]
Let's illustrate with an example. If you were born in 1960 and your intended benefit is $2,000, your early claim could result in as little as $1,400 or as much as $2,480, depending on when you decide to collect.[1]
The Long-Term Impact
Although the initial gap in benefits might seem substantial, the long-term benefits of delaying your claim outweigh the penalty.[1] By waiting, you'll typically receive a larger monthly benefit, which, when compounded over time with cost-of-living adjustments, significantly increases your total lifetime earnings from Social Security.
The study found that the median lifetime increase was over $182,000, with high earners gaining almost $900,000. Interestingly, lower-wage workers actually benefit the most by waiting, with a median gain of 16%.[1]
Not only will you have more money to spend, but you'll also be better equipped to handle financial setbacks in retirement. Most people underestimate their lifespan, planning for an average life span instead of a maximum one. By claiming early, you increase the risk of outliving your savings.[1]
In conclusion, while the decision to claim Social Security benefits early or late is personal, the research strongly suggests that waiting until your late 60s or even into your 70s can significantly improve your financial security in retirement.
[1] Source: non-partisan economic research organization. The specific findings and statistics presented in this article are based on this study, but the original study report is not publicly available. The information provided in this article is a summary of the study's key findings and should be used as a general guide for your retirement planning goals and decisions, not as replacement for professional financial advice. Always consult with a financial advisor before making any significant retirement decisions.
- Considering retirement, you might need to think about the impact of prescriptions on your retirement savings, as healthcare costs often increase with age.
- When planning for retirement, it's important to consider the finance spectrum, as some individuals may require more financial support in their golden years than others.
- If you're aiming for early retirement, you'll need to make sacrifices in your spending habits and savings strategy, as delaying Social Security benefits can lead to a higher average monthly income in retirement.
- According to the study, individuals who delay claiming Social Security benefits beyond their Full Retirement Age (FRA) can expect to earn an average of $182,000 more in lifetime benefits than those who claim early, which can help cover prescriptions and other healthcare expenses throughout retirement.
