Social Security is a crucial part of retirement for millions of Americans. For many retirees, it’s not just an additional income source but a safety net that helps them manage their living expenses. Understanding how to maximise Social Security benefits can make a big difference in your retirement plan. Two common ages for people to start receiving their benefits are age 62 and age 67. But choosing the right age to claim your Social Security can have a big impact on the amount of money you will receive monthly. This article will explore the average Social Security benefits at ages 62 and 67, the factors that affect your benefits, and which age might be better for you.
What is Social Security?
Social Security is a government program that provides financial support to people who are retired or unable to work. It helps cover basic living expenses for millions of Americans. For most retirees, Social Security isn’t the only source of income, but it’s an important one.
The amount you get from Social Security depends on factors like how long you worked, how much you earned, and when you decide to start collecting benefits. The age at which you begin collecting can make a big difference in how much you get.
Factors That Affect Your Social Security Benefits
Before we dive into the benefits at ages 62 and 67, let’s first understand the factors that influence how much you will receive from Social Security.
1. Work and Earnings History
Your work history and how much you earned throughout your life play a big role in determining how much you will receive. The Social Security Administration (SSA) uses your 35 highest-earning years to calculate your monthly benefit. If you worked for fewer than 35 years, the SSA will count $0 for each year less than 35, which could lower your monthly benefit.
2. Full Retirement Age (FRA)
Full Retirement Age (FRA) is the age at which you can receive 100% of your Social Security benefits. Your FRA depends on your birth year. For people born in 1960 or later, the FRA is 67.
3. Claiming Age
You can start claiming your Social Security benefits as early as age 62, but if you do, you’ll get a reduced benefit. If you wait until you reach your FRA (usually 67), you will receive your full benefit. Waiting even longer to claim benefits can increase your monthly payment, up to age 70.
Social Security Benefits at Age 62
Claiming Social Security at age 62 is a common choice for many people because it means you don’t have to wait. It’s especially attractive for those who need money quickly or are no longer working. However, claiming benefits at age 62 comes with a few downsides.
The Pros of Claiming at 62
- Immediate Income: If you need money soon, claiming at 62 means you can start receiving your benefits right away.
- Avoiding Possible Benefit Cuts: Social Security is expected to run out of money by 2033, which might lead to cuts in benefits. Some people choose to claim early to get as much as they can before that happens.
The Cons of Claiming at 62
- Reduced Monthly Benefits: Claiming at 62 means your monthly benefits will be permanently reduced by about 25-30%, depending on your birth year.
- Retirement Earnings Test: If you continue to work while receiving Social Security at age 62, the SSA may withhold some or all of your benefits based on how much you earn.
Average Benefits at Age 62
According to the Social Security Administration, the average benefit for a retired worker at age 62 in December 2023 was $1,298.26. While this may be a helpful amount for some, it is considerably lower than the benefits at age 67.
Social Security Benefits at Age 67
Age 67 is the Full Retirement Age (FRA) for anyone born in 1960 or later. At this age, you can receive 100% of your monthly benefit.
The Pros of Claiming at 67
- Full Benefits: Claiming at 67 ensures you get 100% of your benefits.
- No Earnings Test: Unlike at age 62, if you continue working at age 67, you don’t have to worry about the retirement earnings test.
The Cons of Claiming at 67
- Waiting Longer: By waiting to claim at 67, you delay receiving benefits for a few more years, which means you might miss out on the immediate income you need.
- Missing Out on More Benefits: If you live a long time, you may wish you had started collecting benefits earlier since you could have gotten more money over the course of your lifetime.
Average Benefits at Age 67
In contrast to the average benefit at age 62, the average benefit for a person who begins collecting at age 67 is higher. In December 2023, the average benefit at age 67 was $1,883.50. This is about 45% more than the benefit at age 62.
Which Age is Better for You: 62 or 67?
There is no universally applicable solution to this question. Whether you should start collecting Social Security at age 62 or age 67 depends on several factors.
- Health: If you have health issues and might not live as long, it may make sense to start claiming early at age 62.
- Financial Needs: If you need the money right away, claiming at 62 might be the best option.
- Life Expectancy: If you expect to live a long life, waiting until age 67 (or even later) could maximise your lifetime benefits.
Statistical Analysis of Claiming Ages
A study by United Income in 2019 found that 79% of retirees began claiming Social Security at ages 62, 63, or 64. However, only 8% of these claims were considered “optimal” when looking at lifetime income. The study also found that people who claimed at age 70 could maximise their lifetime benefits, but claiming at age 67 was the next best option.
In summary, while claiming Social Security at age 62 gives you access to your benefits sooner, it comes with a permanent reduction in your monthly payment. On the other hand, claiming at age 67 allows you to receive 100% of your benefits, providing more monthly income. If you can afford to wait, claiming at age 67 (or even later) could be the better choice for maximising your lifetime income.
Planning your retirement requires a thorough understanding of Social Security’s ins and outs. By knowing your options and considering your personal circumstances, you can make an informed decision that will benefit you in the long run.
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