There appears to be no end in sight to the age-old debate about the best time to begin collecting Social Security benefits.
The lack of a clear-cut answer is one factor. Even if your friends, family members, or the financial press tell you otherwise, your own personal situation will dictate what the ideal retirement age is for you.
Finally, it’s important to remember that there are both advantages and disadvantages to claiming Social Security benefits at any age. This article examines three common scenarios in which retirees receive Social Security benefits, as well as the pros and cons of each.
62 Years Of Age (Early Retirement)
More than a quarter of retirees choose to claim Social Security benefits at the age of 62, according to a recent study. However, there is a certain appeal to receiving what appears to be “free” government money as soon as possible. Some retirees, on the other hand, see this as the best option.
You may be forced to claim early if you have few other sources of income and rely on Social Security to put food on the table. Some retirees wait until they are 62 in order to collect their benefits for as long as possible. Another option is to live in a low-cost country, where the size of a Social Security check can be enough to live on, even for those who are in their sixties.
Make sure you are aware of the fact that drawing Social Security benefits at the age of 62 will permanently reduce the amount of your check by about 30 percent.
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67 Years Of Age (Full Retirement)
The Social Security Administration has set a retirement age of 67 for those born after 1960.
Since the implementation of Social Security in the 1930s, the average American’s life expectancy has increased significantly, allowing an increasing number of people to not only live longer but also work longer. A gold watch and a pink slip at 65 used to be the traditional retirement age in the United States, but today, many people work until they are 67 or even older. As a result, the percentage of Americans claiming Social Security at the age of 62 has dropped from around 50 percent in the mid-2000s to less than 30 percent today.
Bottom line: If you plan to work until at least full retirement, there may be no need to take early Social Security benefits. At 67, a $1,400-per-month benefit will rise to about $2,000, and this “pay raise” will last for the rest of your life if you hold off until then.
70 Years Of Age (Late Retirement)
You’re in good company if you can hold off on filing for Social Security benefits until you’re 70. According to the Social Security Administration, only 5% of men and 7% of women begin the application process for retirement benefits when they are 70 years old..
There are a slew of reasons for this. In the first place, many retirees simply cannot afford to wait eight years after they turn 62 to begin receiving Social Security benefits. Second, people in poor health may worry that they won’t live to 70 or that they won’t be able to use their benefits
Waiting until your 70th birthday, if you don’t need the money (perhaps you plan to continue working or you have another source of retirement income) or if you’re in excellent health, is a great option. Those who were born in 1943 or later will see an increase of 8% in their monthly benefits for every year they wait to file for Social Security after the age of 67. To put that in perspective, the stock market returns an average annual return of just under 7%. As a result, a $2,600 monthly benefit at the age of 67 could increase to about $3,300 at the age of 70.
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Is There A Breakeven Point?
By the time you reach the breakeven point in your Social Security benefits, you will have received the same amount of money, regardless of when you began receiving them. Let’s say you have the option of withdrawing $1,500 per month at 62 years old or $2,100 per month at 67 years old. In order to draw $90,000 by the time you’re 67 years old, you’ll need to start at the beginning of your sixties. The additional $600 a month that you would have earned by waiting until age 67 means that it will take you 12.5 years to break even. You’ll have earned the same amount of money at 79.5 years old whether you started at 62 or waited until 67 in this case.
For the best total benefits, you’ll need to guess whether you’ll live beyond the breakeven point. Nobody can say for sure how long they will live, but you can make an educated guess based on factors such as life expectancy tables and your own general well-being. Delaying benefits until age 70 is likely to yield the highest income if you are in good health and come from a long-lived family.
Here Is What Matters
In terms of when to begin collecting Social Security benefits, there is no right or wrong way. The best time to retire depends on a variety of factors, including your health, current retirement savings, long-term goals, and the date you plan to stop working.