A good place to start is to understand that financial planners often say that one of the most prudent money-related decisions one can make is to delay filing for as long as possible. That advice is supported by the Social Security Administration (SSA) as well.
“Workers planning for their retirement should be aware that retirement benefits depend on age at retirement. If a worker begins receiving benefits before his/her normal (or full) retirement age, the worker will receive a reduced benefit. A worker can choose to retire as early as age sixty-two, but doing so may result in a reduction of as much as 30 percent,” the SSA notes.
“Starting to receive benefits after normal retirement age may result in larger benefits. With delayed retirement credits, a person can receive his or her largest benefit by retiring at age seventy,” it continues.
AARP, a U.S.-based interest group focusing on issues affecting those over the age of fifty, added that “your monthly payment will be 76 percent higher if you wait to start benefits at seventy rather than sixty-two, the earliest possible age.”
“If your full retirement age is sixty-seven and you claim Social Security at sixty-two, your monthly benefit will be reduced by 30 percent—permanently. File at sixty-five and you lose 13.33 percent,” the organization continues. “If your full retirement benefit is $1,500 a month, over twenty years that 13.33 percent penalty adds up to nearly $48,000.”
Here’s how the numbers stack up. For those individuals who need to start collecting the benefits at age sixty-two, the maximum amount will be $2,324. But if one can wait till age seventy to file, he or she would be eligible for the absolute maximum benefit amount—which currently stands at $3,895. At full retirement age, which is currently sixty-six and two months, the maximum amount is $3,113.
However, as noted by financial services company Charles Schwab, some Americans might, in fact, need that monthly Social Security cash immediately at age sixty-two.
“If you’ll need your Social Security benefits to make ends meet, you may have fewer options. If possible, you may want to consider postponing retirement or work part-time until you reach your full retirement age—or even longer so that you can maximize your benefits,” the company said.
“Taking Social Security early reduces your benefits, but you’ll also receive monthly checks for a longer period of time. … (But) taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger,” it continued.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.