If you’re unclear about how your claimed age impacts Social Security benefits, consider this before applying.
You may believe you’ve done everything possible to maximize your Social Security benefits. After years of hard work and increased income throughout your career, you’re now looking at the application screen, contemplating whether it’s time to start receiving benefits from the program.
While that may very well be the case, there’s an essential factor you need to think about: your age. Applying early can cut your benefit check by as much as 30%, potentially costing you tens of thousands of dollars over your lifetime.
Delaying your application could lead to higher payouts, yet it might not always be a financially feasible option. Still, it’s worth noting that putting off your application for a short period can yield significant benefits in the long run. Just one additional year could mean a notable increase in your payments.
Understanding the impact of your claimed age on social security benefits
It’s probably already clear that you can start claiming Social Security retirement benefits when you hit 62.
The Social Security Administration says that claiming benefits “on time” is aligned with your Full Retirement Age (FRA), which most people currently at work will find is 67, though it depends on your birth year.
Your primary insurance amount (PIA), the benefit you qualify for at your FRA, is calculated based on your highest 35 years of earnings. When you apply, the amount you receive could be adjusted up or down based on whether you file before or after reaching your FRA.
If you decide to take benefits sooner, you can expect smaller checks, but if you wait, your benefits increase until you reach 70. Beyond this age, you can no longer earn those late retirement credits. Essentially, delaying your benefits from 62 to 70 will ramp up your monthly check progressively the longer you wait.
If your FRA is 67, claiming benefits at 62 or 63 will result in your check being reduced by about 5% for each year you claim early. Claiming at 64 to 66 will mean a reduction of 6.67% annually.
So, for example, if you claim at 64, your check will be approximately 20% less than your PIA. And if you file at 62, expect a 30% cut (though adjustments for cost of living will slightly increase this amount over the years).
Delaying until 70 yields the biggest benefit. If your FRA is 67 and you would receive $2,000 at 62, waiting until you turn 70 could boost it to $3,543. Even waiting just until you’re 63 can raise your benefit by about $143 each month or around $1,714 annually.
Factors to consider when deciding whether to delay your Social Security application
There are three key aspects to think about when weighing whether to apply for Social Security now or postpone for more than a year.
Your finances
If you’re unable to work and don’t have significant savings, deferring Social Security might not be an option. In that case, it might be better to claim benefits early, even if it means receiving a reduced amount for the rest of your life, rather than accumulating debt. Alternatively, if you’re financially stable, holding off for just a month or two could secure you a higher benefit check.
Your life expectancy
If you have reason to expect a long life, waiting until your FRA or later could lead to a better lifetime benefit. Conversely, if you believe your time might be shorter, it could make more sense to claim benefits sooner. But then again, some seniors may choose to wait for various reasons—especially if they have dependents whose future benefits could be impacted by their decision.
Impact on family benefits
Beyond your benefits, consider how your choices influence family members, particularly if they are eligible for spousal or dependent benefits based on your earnings. If you have dependents who might miss out on benefits if you delay applying, you might want to file earlier to secure those funds for them.
It’s wise to discuss your application strategy with family members affected by your decision. If you feel the timing isn’t quite right now, perhaps putting off your application is the best path. Just remember, it can take some time for the Social Security Administration to process your application, so aim to get it in a few months before you want benefits to start.
