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Deciding when to start Social Security benefits can make a lasting impact on your retirement finances.
Social Security offers reliable, inflation-adjusted income that provides a secure foundation in your retirement plan.
Key ages for Social Security Benefits
Your Full Retirement Age (FRA) is the point at which you're entitled to your full Social Security benefit.
This age used to be 65, but it's gradually increased to 67 for most people born after 1960.
However, you can start benefits as early as 62 or as late as 70.
The catch: the sooner you start, the smaller your monthly payout will be.
If you begin at 62, your benefits are permanently reduced, locking in a lower income.
On the other hand, delaying until 70 boosts your monthly benefit by up to 8% per year after FRA, thanks to "retirement credits."
So, the longer you wait, the higher your monthly payment.
Flexibility to reconsider
If you claimed benefits early but then changed your mind, you're not necessarily stuck with that decision.
If it's been less than a year, you can withdraw your claim and repay the benefits you received, essentially resetting your start date.
For those beyond that one-year mark, there's a little-known strategy called "Claim-Suspend-Restart" (CSR), which allows you to stop payments at FRA, accumulate retirement credits for up to three years, and then resume with a boosted benefit.
Common reasons to claim early
About 27% of people start claiming Social Security at 62, often because of specific financial or personal needs:
- Health Concerns: If you expect a shorter lifespan, an early claim may seem more practical.
- Unplanned Early Retirement: Some retire earlier than planned due to layoffs and start claiming benefits to cover expenses.
- Lack of Emergency Savings: Without emergency savings, Social Security can provide immediate cash flow.
- Healthcare Costs: Many use early benefits as a bridge to Medicare, which kicks in at 65.
- Benefits for Young Children: If you have minor children at home, claiming early can allow them to receive a benefit.
- Investment Opportunities: Some claim early to invest their Social Security, hoping to outpace the SSA's rate of increase.
- Concerns About Social Security Solvency: Nearly half of all Americans worry that Social Security funds could run out.
- Caregiving: Leaving work to care for a loved one may lead to an early claim for immediate income.
For those who are financially secure and in good health, waiting until age 70 can provide the highest lifetime benefit, creating a stronger cushion against inflation.
The CSR strategy can be a helpful option for those who can pause benefits after FRA to enjoy larger payments later.
Choosing the right time to claim Social Security depends on personal factors, including health, financial security, and lifestyle.
If you can delay benefits, you'll increase your guaranteed monthly income for life.
On the other hand, an early start may work best for those needing immediate cash flow.
With the flexibility to change your strategy, you can adjust as your retirement needs evolve.