What's the ideal age for claiming Social Security retirement benefits? It depends on who you ask. The earlier you start, the smaller your checks. But, you'll collect these payments for more time. That's the trade-off.
But what exactly are your options, and how much of a difference can claiming later rather than earlier make? The answer might surprise you.
The cost of claiming early vs. the benefit of waiting
To be a government-run program, Social Security offers taxpayers a respectably wide range of payment options. Eligible individuals can claim as early as the age of 62, but can also wait until they turn 70. Or, they can file at any point in time in between. Each of these choices, however, results in a different monthly payment.
And the disparity between these payments can be stark.
The table below puts things in perspective, comparing the difference in payment size for each age of this nine-year range relative to this year's average Social Security retirement benefit of $1,976 per month. Notice that while there's a progressive reduction in benefits the earlier you claim, there's also an ever-growing benefit for delaying the initiation of benefits beyond your full retirement age (or FRA). This additional benefit, however, stops growing once you turn 70.
| Age at Claiming/Initiation of Benefits | Monthly Payment | % vs. Amount When Claiming at FRA |
|---|---|---|
| 62 | $1,383 | 70% |
| 63 | $1,482 | 75% |
| 64 | $1,581 | 80% |
| 65 | $1,713 | 86.7% |
| 66 | $1,844 | 93.3% |
| 67 | $1,976 | 100% |
| 68 | $2,134 | 108% |
| 69 | $2,292 | 116% |
| 70 | $2,450 | 124% |
Data source: Social Security Administration. Note that this year's official FRA is 66 years and 10 months for people born before or in 1959. For those born in or after 1960, it is 67. Payment amounts as well as percentage comparisons to intended payments at FRA have been rounded, and could be different for beneficiaries wishing to name a spouse as a co-beneficiary.
You're reading that right. For the average beneficiary right now, the difference between claiming when you're 62 versus claiming at the age of 70 is over $1,000 per month. That's no small amount for most households. And the bigger your payment, the bigger the potential difference.
Other things to consider
The comparisons are clear -- there's an obvious and meaningful mathematical upside in waiting as long as possible to file for Social Security's retirement benefits.
Except these numbers alone don't necessarily tell the entire story for every individual and their unique situation. It's possible there's a very good reason to claim Social Security benefits as early as you possibly can, like health-related matters. You may also have enough money saved up to tap later in your life (like an IRA) to allow you to begin collecting some income before you otherwise might.
There's another often overlooked upside to claiming at 62 years of age, however, even if you don't need this money yet because you're still gainfully employed. That is, you might be able to do something more financially productive with these cash payments than the Social Security Administration is doing for you on your behalf.
Although the figure's not etched in stone, the average internal rate of return on money withdrawn from your paycheck and forked over to Social Security has been in the ballpark of 4%, after inflation. Sometimes it's more. Other times it's less. Any given year's effective return on this "investment," however, mirrors the average yields on longer-term U.S. Treasury Bonds at the time. Right now that's between 4% and 5%. If you can take these payments and do something more constructive with the money, it makes sense to do so.
Image source: Getty Images.
But won't collecting Social Security while you're also working possibly reduce your Social Security payment?
If you're below your full retirement age, yes, it can. Specifically, any work-based wages beyond $23,500 you earn this year will start to shrink any Social Security payments you're already collecting. If you're going to earn enough at your job in 2025, in fact, it's possible you could erase all of your current Social Security benefits payments.
You're not actually losing money if this ends up being the case, however. These reductions are ultimately credited toward future Social Security payments, which are no longer reduced by work-based income once you're past your full retirement age. (There's also a very specific income threshold that applies only in the year in which you reach your full retirement age, although that's best left to another discussion.) In many regards this option allows you to have your cake and eat it, too.
For most people though, just know that plans to invest their early Social Security payments rarely pan out as initially intended. Successfully implementing such a plan requires a great deal of discipline.
Just think about it very carefully
Bottom line? There's no one-size-fits-all answer as to when you should claim your Social Security retirement benefits. You'll want to think carefully about your particular situation, including making some predictions as to what it will look like in the future.
Broadly speaking though, it rarely hurts to wait just a little while longer to claim, if only to make sure that plan is going to work for you, or to beef up your numbers just a little bit more.
And you will most definitely want to make sure it works for you before making the decision. The Social Security Administration will allow people who have claimed at or after reaching full retirement age to suspend these payments if they've only been collecting for 12 or fewer months. Anyone initiating these benefits before reaching their full retirement age, however, is permanently locked into their reduced payments.
