Social Security benefits can make or break retirement for many seniors.
The median balance of 401(k) is about $35,000, according to Vanguard’s 2022 How America Saves report, meaning Social Security benefits will likely play a major role in many older adults’ retirement plans. It is therefore wise to ensure that you earn as much as possible.
Fortunately, there are ways you can increase the amount of your monthly payments. And there is one strategy in particular that can increase your benefits by up to 24%.
How your age affects your benefit
The age at which you start claiming Social Security has a significant effect on the amount you receive each month. The sooner you claim, the smaller your checks will be. But delaying benefits can give you a big boost.
The most important number to know is your full retirement age (FRA), which is the age at which you receive your full benefit based on your work record. If you were born in 1960 or later, your FRA is 67 years old.
If you have an FRA of 67 and you file as early as possible at age 62, your benefit will be reduced by 30%. But if you wait until the age of 70 to claim, you will receive your full benefit plus an additional 24% per month.
These adjustments are also permanent. A common misconception is that if you apply early, your benefits will increase once you reach your FRA. In reality, however, your benefit is generally committed for life when you start claiming. By deferring distributions, you may be able to earn bigger checks each month for the rest of your life.
From what age should you be entitled to social security?
There is not necessarily a right or wrong time to file for Social Security. Some people may be better off claiming early, others may benefit from waiting a few years, while others can still split the difference and file it with their FRA. The right move for you depends on a number of factors.
- Claim early: This option makes the most sense for those looking to jump-start their retirement or have reasons to believe they may not live well into their 80s or older. For example, if you have health problems, you can receive more over the course of your life by applying earlier.
- Deferral benefits: Waiting a few years to claim can increase your benefits by hundreds of dollars a month, so this can be a smart move if your retirement savings are falling short. If you expect to have a longer-than-average life, these bigger checks can go a long way when your savings eventually run out.
- Submit to your FRA: If you don’t know when to apply, filing a claim with your FRA can be the best of both worlds. You get your full benefit without any discounts, but you also have less time to wait to receive benefits.
Your overall financial situation will also play a role in your decision. If you have a robust retirement fund and don’t necessarily need the extra benefit you would receive by deferring, it doesn’t hurt to claim as early as possible. But if Social Security becomes your primary (or only) source of income in retirement, procrastination can make your senior years more financially comfortable.
There is no single best age to claim Social Security as it depends on your individual circumstances. But understanding how your age affects your benefit amount makes it easier to make the best decision for your situation.