Social Security – To Claim or Not to Claim… That is the Question
Social Security provides a financial safety net to individuals as they reach retirement but the pros and cons of when to actually tap into the benefits are complicated. Choosing the age at which you draw benefits is a decision you should make with care.
Some people start collecting Social Security as soon as they are eligible at age 62, while others may wait until as late as age 70, preferring to see their benefits grow. Then there are those who are in between, drawing on Social Security when they reach full retirement age, which is 66 or 67 for people born after 1942. How do you make a smart decision?
No One-Size-Fits-All
According to the Social Security Administration, you’ll get the same amount of total benefits whether you collect early, at full retirement age or at age 70 – assuming you live to the average life expectancy for your age. The longer you live past that age, the more you’ll benefit from delaying your payments. Conversely, if you’re in poor health, you might be better off taking benefits early.
The earlier you claim Social Security benefits, the smaller your monthly payment will be. So, while you can claim at the age of 62, the amount you’ll receive will be less by a percentage than if you wait until your full retirement age (determined by the year you were born), at which point the Social Security Administration will pay out 100% of your benefits. If you wait to claim Social Security until after you reach full retirement age and up until the age of 70, the Social Security Administration will reward you with retirement credits which translate into an increased monthly payment.
“At first blush, the extra amount that can be received by waiting to claim until 70 appears to make waiting the smartest decision,” explains The Motley Fool website, www.fool.com, a website dedicated to helping to empower individual investors. “However, it’s important to remember that the amount that is paid out in benefits over a lifetime is calculated to be the same, regardless of what age you claim.” So while you might get bigger checks by waiting, you also will collect fewer checks in your lifetime.
A Careful Calculation
Social Security benefits are determined by a complex formula. Knowing when to claim Social Security benefits is an integral part of retirement planning. If you want to explore the different scenarios of when to take Social Security, you can estimate your projected payment by using the online Social Security calculator, https://www.ssa.gov/retire/estimator.html. You can also view your projected payment by creating an account on the Social Security Administration’s website, https://www.ssa.gov.
If you don’t feel comfortable with calculators or have more complex issues, consider finding a financial planner or financial advisor you can trust to help you weigh your options and make decisions. It’s important to evaluate which strategy is right for you and will provide the most financial security in your golden years. The right strategy depends upon many factors including health status, how long you intend to work, retirement goals, family longevity and other personal matters.
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