The question of when to apply for Social Security benefits is a tricky one. Of course, the short answer is that you become eligible to start taking benefits when you turn 62, but that might not be the best time for you to start tapping those benefits.
When to apply for Social Security
One of the most important factors determining when you should start taking benefits is your age — covered here in detail. However, be sure you know other key points to consider before you claim Social Security. For example, if you're still working, do an earnings test to understand how your payments might be lowered. Come from a long-lived family? You'll need to make sure you plan for increased longevity. You may even be able to get a public pension and full social security benefits. And don't forget to consider tax implications and how starting benefits might affect your spouse.
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Full retirement age (FRA)
Age 62 marks only the beginning of eligibility for Social Security; it does not put you at what's called "full retirement age" (FRA). In other words, you won't become eligible for full benefits until you reach your FRA, which differs depending on your birth year.
Here is a summary of when you will reach your FRA, by birth year. If you were born:
- In 1960 or later, your FRA is age 67.
- In 1959, your FRA is age 66 and 10 months.
- In 1957, your FRA is age 66 and six months.
- In 1956, your FRA is age 66 and four months.
- In 1955, your FRA is 66 and two months.
- Between 1943 and 1954, your full retirement age (FRA) is age 66.
Here's what happens if you start tapping Social Security at age 62
Starting to take Social Security at age 62 will dramatically decrease the size of the monthly payments you will receive, which is why many retirees wait a few years to start tapping the benefits. The more months remaining between age 62 and your FRA, the more your monthly payments will be reduced.
For example, if you were born after 1960, your full retirement age is 67. If you start your benefits at age 62, a $1,000 monthly benefit would be reduced to $700. And if you are married, your spouse's monthly benefit would drop from $500 to $350. Your total family income from social security would be $450 less than if you had waited until your full retirement age.
The Social Security Administration's (SSA) "Full Retirement and Age 62 Benefit By Year Of Birth" table gives a more detailed list of this effect. You can also refer to the SSA's Retirement Age Calculator, which provides two helpful numbers. First, it calculates your full retirement age, as you might expect. Second, it generates a table showing the percentage decrease in benefits you and your spouse would receive for each year and month you retire before your FRA.
The SSA also has some additional footnotes. For example, those born on Jan. 1 should use the previous year's numbers. Similarly, those born on the first of the month should use the previous month's numbers. Additionally, you have to be at least 62 years old for an entire month before you will be eligible to receive Social Security benefits.
Why it might make sense to wait
If you wait until age 70 to start taking Social Security, your monthly payments will increase. This is one reason many seniors wait to start claiming benefits, especially if they’re in good health.
For example, those born in 1943 or later will see a 12-month rate of increase of 8%. This rate falls to 7.5% for those born in 1941 and 1942 and 7% for those born in 1939 or 1940. However, those increases stop when you reach age 70, so it doesn't make sense to wait beyond age 70.
Alternatively, many retirees split the difference between 62 and 70, tapping benefits starting at age 65. Medicare eligibility is perhaps the biggest reason to start taking benefits at age 65 because you gain access to health insurance at that age.
So, it can be a good idea to wait until age 65 to quit working. If you retire before then, you may not have access to affordable health insurance without Medicare.
The bottom line
Deciding when to start taking benefits is a critical and personal choice that depends on multiple factors. For example, you'll need to consider the size of your nest egg, whether you're still working, whether you're in good health with the potential for living to an older age, and other factors. In addition, your decision should weigh whether you still have health insurance or if you are eligible for benefits on someone else's record.
Of course, the earlier you start taking Social Security, the longer you will receive monthly payments. However, your monthly payments are reduced if you start taking benefits earlier, so there is no one-size-fits-all solution for every senior.
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