Your retirement standard of living could very well be worse if you claim your Social Security benefits at age 62. That’s surprising because the Social Security Administration goes to great lengths to ensure that, regardless of when retirees claim their Social Security benefits, they will be no better or worse off. Those claiming at age 62 — “early claimers,” as they’re called — will receive more years of benefits than those who wait, but at a reduced rate.
In a famous experiment, a child is given a classic problem: Eat a marshmallow now or wait for a bigger reward. Isn’t that how most people face retirement or financial planning? Live now and hope for the best later? As in the experiment, a little self-control and savings discipline goes a long way to ensuring financial comfort in retirement.
Don Mitchell loves his job as a software engineer, has no plans to retire, and doesn’t turn 60 till next March. But he’s already begun pondering a weighty question facing most Americans in their early 60s: when to begin collecting Social Security benefits.
The most common age that people choose to start collecting their monthly Social Security payments is 62.
While the average retirement age is 63, some people work well past that because they love it — or can’t afford not to.
Part of me wants to take the money on the table early, although the math side of my brain says the premium for waiting until 70 is more than worth it. Where can you earn a guaranteed 8% a year on anything?
“My dad was healthy, active and fit until he was struck with Parkinson’s disease. He realized that by deferring his benefit to age 70, he would lock in a larger benefit.”
Social Security rewards you for delaying your benefits. Your lowest payment will be at 62, when you qualify for “early” payments. Then you get a boost at your “full” retirement age (FRA), which, for most people, is 66. Then you max out at 70.
You will qualify for bigger monthly payments from Social Security if you sign up at an older age. Delaying claiming Social Security is particularly beneficial to people who have a long life expectancy or want to leave larger payments to a surviving spouse.
Americans are finally getting the message: Waiting to claim Social Security until full retirement age or later results in bigger monthly benefits for life and can also boost survivor benefits for a remaining spouse.
Social Security is a gilt-edged insurance policy that protects you from a major risk: living a very, very long time—long enough to outlast your money.