There are countless decisions to make as you approach retirement, but choosing when to receive Social Security benefits is one of the most important. The age you apply has a direct impact on the amount of your benefits, sometimes by hundreds of dollars a month.
Full retirement age (FRA) is the age at which you receive 100% of the benefits owed based on your work history. Her exact FRA will depend on your year of birth, but for those born after 1960 he will be 67 years old.
It is possible to file before or after FRA, but it will affect your benefits. If you claim as soon as you turn 62, your benefits will be permanently reduced by up to 30%. Once you're past your FRA (up to age 70), you'll receive your full benefit plus a bonus that increases each month until you reach age 70, at which point you'll receive a 24% bonus.
Choosing the right age to apply can be confusing, and if it seems like there's a lot of conflicting advice out there about the best time to apply, that's because there is. The age at which you should enroll in Social Security depends largely on your individual circumstances, so there is no one-size-fits-all answer.
That said, research shows that there may be an ideal age for most people to start collecting benefits, which could reduce the average retiree's income to more than $100,000 over the long term. may increase.
Data shows the best time to receive Social Security
In 2019, researchers from financial planner United Income examined retirees' decisions about Social Security claims. Next, we looked at the remaining income of those participants after retirement. They used that data to determine how many retirees applied for benefits at the optimal age to maximize lifetime earnings.
As a result, only 4% of retirees file at the optimal age, and the average retiree household misses out on about $111,000 in lifetime income by filing at a less-than-ideal time. I understand that.
The study found that more than 70% of retirees filed for Social Security before age 64, which was the ideal age to file for only about 6.5% of retirees. However, while only 4% of retirees waited until age 70 to apply, about 57% of study participants could have earned more over their lifetime if they had applied at that age.
Data shows that while most seniors will earn more over their lifetime if they wait until age 70 to apply, filing at age 62 or 63 may be the most financially challenging. be.
There is one important caveat
Although the data shows that 70 is optimal for reaping benefits, it is important to note that this study is based only on. finance Aspects of social security. But there are more considerations than just financial aspects when deciding when to file a claim.
For example, it's wise to take into account your health and potential longevity. It's not the most fun topic, but if you're battling health issues or have reason to think you won't live past age 70, applying early gives you more time to apply. You may be able to receive benefits.
Others don't have the luxury of choosing when to retire. If you lose your job or are unable to work, it's wise to start receiving Social Security benefits right away. You can retire in your early 60s and delay your benefits until age 70, but you'll need to rely on other sources of income in the meantime and run the risk of quickly depleting your savings.
The data shows that for most people, age 70 is the best age to collect benefits, at least when it comes to maximizing income. But Social Security is more complicated than that, and considering the big picture before you apply can help you decide which age is best for your situation.