If you don’t understand how the claimed age affects Social Security benefits, you should read this before submitting your application.
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You may think you have done everything you could to maximize your Social Security benefits. You worked hard for decades. You’ve increased your income over your career. Now you’re staring at the application screen and wondering if it’s time to finally receive money from the program.
That may be true. But there is another important factor to consider: your age. Early application will reduce your check by up to 30%. It could have lost tens of thousands of dollars in benefits over your lifetime.
Waiting for an application will help you get more from the program, but it is not always financially viable. However, there is no need to delay for long periods of time because that wait is worth it. Deferring the billing date by one year could potentially provide lasting economic benefits.
How your claimed age will affect your social security benefits
You may already know that you are eligible for Social Security retirement benefits when you turn 62.
According to the Social Security Administration, claiming “on time” means that the government considers you to be your full retirement age (FRA). That depends on your birth year, but for most people who haven’t retired yet, it’s 67.
The benefit you qualify for in your FRA is known as your primary insurance amount (PIA). The Social Security Administration calculates this based on the 35 maximum operating years of your income history. Next, when you receive the initial check, you adjust your actual profit up or down depending on whether you are older or younger than the FRA.
Reducing your check early will increase your check by claiming it was delayed. It increases until you reach the age of 70. You will then no longer be able to earn additional late retirement credits. Or, to put it another way, delaying your social security acquisition monthly from the day you turn 62 until the day you turn 70 will increase the size of your check. And the longer you postpone, the more the increase will increase.
If your FRA is 67, each month claiming that it will happen when you are 62 or 63, your check will be reduced by 5/12 of 1% of your PIA – therefore 5% per year. Reduce checks early every month to 5/9, 1% of PIA for three years from 64 to 66. This will result in a 6.67% reduction per year.
So, for example, if you are claiming at age 64, the check is 20% less than the main insurance amount. Charge at 62 and they will be reduced by 30% (of course, they will be adjusted a little up for most years, due to adjustments to the cost of living for the year).
Source: Social Security Bureau.
Delaying to 70 clearly results in the biggest check. If you have a 67-year-old FRA and qualify for a $2,000 monthly benefit at 62, you can earn $3,543 per month by waiting until $70 signs up. However, even shorter delays have significant effects. Waiting until you’re 63 will increase that $2,000 per month’s profit by about $143, and increase it by about $1,714 a year.
How to decide whether to delay your social security application for a year
There are three important factors to consider when deciding whether to apply for Social Security now or wait more than a year to sign up.
Your finances
If you can’t work and have little personal savings, delaying Social Security may not be an option for you. In this case, even if it means settling down for less monthly benefits for the rest of your life, making an early claim would be better than becoming a debt. However, if you can afford it, you can benefit from delaying Social Security by one or two months in order to lock down a slightly larger check.
Your average life expectancy
If you have good reason to expect to live in the ’80s and later, delaying Social Security until it reaches the FRA or later will likely earn you a greater lifelong benefit. However, people who have short lives may get overall from the program by signing up as quickly as possible. If your health and family history gives you reason to think you are in the latter group, then you may be better off claiming social security before.
That said, some seniors with dependents may choose to postpone as much as possible regardless. An early and permanent claim to social security will permanently reduce the benefits of survivors that your family may qualify for after you die. If you believe your spouse or dependents will rely heavily on social security checks that are based on your interests once you are gone, you may choose not to claim Social Security at all while you are alive.
Impact on family benefits
In addition to the impact on the benefits of family survivors, you may also want to consider how your decisions affect other members of your household during your lifetime, especially if you are eligible to claim benefits based on your work records. This includes spouse benefits or dependent benefits for minor children under the age of 18 (19 if they are still enrolled in middle school) or older children with disabilities before age 22.
These families are not eligible to request a check for your work record until you apply for benefits. If you have a family like a dependent who may not qualify for a check within a few years, you may prefer to sign up early so that you can receive their benefits now.
It is best to discuss Social Security Claims Strategy with all affected families. This will allow you to plan the best for everyone. If time doesn’t feel right now, consider delaying the application a little. Please note that it takes time for the Social Security Agency to approve your application. So don’t forget to sign up a few months in advance when you’re hoping to request a check.
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