When should you apply for Social Security?
This is one of the most difficult questions to answer when you think about retirement. You can start the benefits as early as 62 or wait until 70. And there are advantages and disadvantages associated with either asking as soon as possible or waiting as long as possible.
To help you decide which age is best for you, three Motley Fool retirement experts evaluate the best reasons to apply for social insurance at three popular ages: 62, 67 and 70.
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62 years
Maurie Backman: The age of 62 is the first age that you can apply for Social Security and, if you follow this path, you will reduce your benefits substantially by signing up to receive them well before the full retirement age. But despite this reduction, 62 years is still an old age to claim benefits.
On the one hand, applying for social security at age 62 can be your ticket to early retirement. Many people work hard throughout their lives and save diligently for the future. If you are one of them and can afford the living costs of the elderly based on the money you have invested only in 401 (k) or IRA, claiming benefits at age 62 could help you leave the job market sooner. And from there, you will have a better chance of meeting your retirement goals.
Let’s face it – the older we get, the more health or mobility problems we can encounter. So it is fair to assume that you will have more energy to travel, enjoy the nightlife or pursue hobbies at 62 than when you are later. Claiming benefits as early as possible is therefore an opportunity worth taking advantage of if you’ve saved enough to be able to pay a discount on your monthly payments.
Another thing you should know is that, if you have doubts about your health, filing an advance Social Security application can leave you with more money in your life. While it is true that claiming benefits at the age of 62 will leave you with less money monthly, if you pass away relatively young, you may receive a larger payment at a lifetime base.
Obviously, if you have not saved much for retirement and have no reason to think that you will not live a long life, it is a good idea to choose a later age to apply for benefits. But if you have earned the right to start your retirement early or have questions about your long-term health, then 62 may be the perfect age to start receiving Social Security benefits to which you are entitled.
67 years
Katie Brockman: Claiming benefits at age 67 is a good intermediate option if you are unsure whether to apply for Social Security in advance or delay benefits.
The age of 67 is the full retirement age (FRA) for anyone born in 1960 or later. When you claim in your FRA, you will receive the full amount of the benefit you are entitled to receive. In other words, although you do not receive the bonus amount you would earn by delaying benefits, your monthly payments will also not be reduced.
To find out how much you are entitled to in benefits, you can check your statements online with a mySocialSecurity account. Your statements will include an estimate of the value of your benefit based on your actual earnings over your career. Keep in mind that this number assumes that you will file a claim with the FRA, so if you claim before or after that age, adjustments to the benefit amount will need to be counted.
Claiming benefits at age 67 can be a smart move for someone who wants to earn more from Social Security but doesn’t want to work hard. Although you do not necessarily need to claim benefits and retire at the same time, many people continue to work until they are ready to claim Social Security.
Waiting until age 70 to retire and claiming benefits may not be feasible for many workers, especially if you are struggling with health problems or want to start retiring. However, claiming at age 62 means that you will receive significantly smaller checks each month, which can be problematic if money is tight in retirement. Age 67 is a smart compromise for many retirees, because their benefits will not be reduced, but you can still retire relatively early.
70 years
Christy Bieber: Not everyone can wait until they’re 70 to apply for Social Security benefits. But if you can make this plan work, waiting until you’re 70 is usually the best choice. This is true because you will have more money each month when you eventually claim benefits, and because you will maximize the chances of getting the maximum possible lifetime benefits.
See, you can earn delayed retirement credits for each month that you expect to start benefits after the full retirement age, but you cannot earn more credits after the age of 70, so there is no benefit in delaying beyond that age.
These late retirement credits increase the value of your Social Security income by 8% per year for each full year you expect, so they can result in hundreds or even thousands of dollars more in annual income. That extra money can really be useful later in life if your savings start to decline.
And although you need to collect your biggest benefits for a while before making up for the money lost due to the delay, many people tie and live long enough to end better. In fact, research has shown that claiming benefits at age 70 is the financially ideal choice for about 60% of retirees.
Of course, claiming at the age of 62 or 67 may end up being the best option if you die before making up for lost benefits – although you may also end up reducing the spouse benefits left for your surviving widow (s) by claiming in advance. But unless you have reason to suspect that you will not live as long as your life expectancy, chances are good that delaying until the age of 70 will end up being the best decision for you.