Retirement comes with many decisions, but one stands out as particularly critical: when should you start taking Social Security benefits? When you file for benefits, the age at which you do so can have a significant impact on your monthly payments and financial well-being in retirement. While there is no one-size-fits-all answer, recent research sheds light on some key ages to consider.
According to a study conducted by United Income in 2019, only 4% of retirees made the optimal decision in terms of maximizing their lifetime benefits. The average retired household may miss out on approximately $111,000 of lifetime income by claiming benefits at a sub-optimal age. The study further revealed that around 57% of retirees could have earned more by waiting until age 70 to begin claiming. Alternatively, claiming at age 62 or 63 was the best option for only 6.5% of retirees.
From a financial standpoint, ages 62 and 63 are considered the worst times to start taking benefits. Retirees who claimed at these ages were least likely to maximize their lifetime income. However, it’s important to consider other factors beyond just finances when making this decision.
While claiming early at age 62 may permanently reduce your benefits by up to 30%, there are situations where it may still be a smart move. For individuals relying heavily on their monthly Social Security checks during retirement, the reduced benefits can be financially challenging. However, for those with a substantial retirement fund who can do without the extra income, claiming early could offer the opportunity to retire a few years earlier.
Certain circumstances, such as job loss or health issues, may also necessitate filing for Social Security early. Early claiming can make retirement more financially feasible in these cases. It is possible to retire in your early 60s and delay benefits, but it requires relying solely on other sources of income, potentially depleting savings faster.
Considering health issues or a shorter life expectancy, claiming early may lead to a higher total payout over a lifetime. While monthly payments will be smaller, individuals in these circumstances might ultimately receive more by claiming benefits sooner.
It is crucial to recognize that everyone’s situation is unique, and there is no one “correct” age to take Social Security. While delaying benefits often leads to a higher income during retirement, it’s essential to consider the big picture and weigh personal circumstances before making a decision.
N0avigating the decision of when to start taking Social Security benefits requires careful consideration. Research indicates that ages 62 and 63 are generally sub-optimal in terms of maximizing lifetime income. However, individual goals, financial situations, and health factors should all be taken into account. Ultimately, the aim is to make an informed choice that aligns with your specific circumstances and priorities.