When to take Social Security benefits is a complicated subject matter that needs to be considered carefully, especially depending on each person’s individual circumstances. While we may all dream of retirement, we now live a lot longer than we used to and are usually in a lot better health, which means that we can stay in the workforce longer should we need to and we can still enjoy our golden years in reasonable health as long as we take care of our bodies.
We tend to think nothing has changed in the retirement world since the concept became universal, an age at which we stop working and are supported by the government through the taxes we have paid before. But a lot of things have changed, starting with what the new full retirement age is and the amount in benefits we can take depending on the age we choose to take retirement.
The different ages at which a person can claim Social Security benefits
Since this is such a complicated decision, it is one that must be made with a lot of planning. Of course sometimes these plans go out the window surprisingly quickly because of unforeseen circumstances, but oftentimes what we have decided is what we work towards and what will end up happening if all goes well.
The Schroders 2024 U.S. Retirement Survey found that 43% of pre-retirees plan to start Social Security before age 67, and only about 10% plan to wait until age 70. Yet according to at least one report, a majority of people, as many as 90% of them, would benefit from waiting until age 70.
First, let us dispel a myth. “Early retirement” in your 40s and 50s does not exist. You may be able to stop working at those ages, but you will do so without any kind of government assistance related to retirement, so if that is your plan, just know that you will have to wait a very long time to collect any type of benefit. That is why the gurus that advocate for this lifestyle are focused on building sources of passive income, so that you can still pay your Social Security taxes while working less and have a safety net in the future that will allow you to continue to live comfortably. After all, Social Security benefits are calculated based on your income during the 35 highest earning years of your career, and if you stop working in your 40s you will not have 35 years to draw from regardless of how high your salary was during that time.
There are a few common ages at which people can take Social Security benefits, and each one has its own set of pros and cons.
The first and earliest age at which you can retire and claim Social Security is 62 years old. Before that you will not be able to claim benefits, and at 62 you are still not eligible for Medicare unless there are extenuating circumstances like disability reasons. Retiring at this age can sound great, but you will be receiving a maximum of 70% of the benefits you would have been eligible for at full retirement age.
The second age at which people choose to retire is 65. This is the original full retirement age and also when a person becomes eligible for Medicare without any conditions. While this age gives you more benefits than age 62, you are still only looking at about 82% of your full retirement age benefit.
The third age is full retirement age, which is 66 or 67 depending on your date of birth. At this age you get 100% of your retirement benefit, but there is still another age to consider and that is 70. By waiting you can get up to 124% of your full benefit, making your paycheck a lot larger than expected.
According to the Social Security Administration “if you retire at full retirement age in 2025, your maximum benefit would be $4,018. However, if you retire at age 62 in 2025, your maximum benefit would be $2,831. If you retire at age 70 in 2025, your maximum benefit would be $5,108.”
Considering that the average monthly retirement benefit, was $1,981, waiting a bit longer can be very wise.