About 60 percent of Americans start taking Social Security payments before their full retirement age (FRA), which is roughly age 67. Yet beneficiaries who wait until age 67 to claim Social Security receive almost $1,200 more per month than Americans who claim at age 62, the earliest you can claim.
So why not consider holding off until full retirement age and guarantee high monthly payments for the rest of their lives?
One reason is that many U.S. retirees or near-retirees view the right retirement age as a younger age.
“Quite a few people end up weighing 65 against 67 rather than just defaulting to full retirement age,” Taylor Kovar, a financial planner and founder at 11Financial, told NTD News. “Age 65 still sticks in a lot of people's minds as the 'normal' retirement age.”
In 1983, Congress opted to gradually move Social Security’s full retirement age from 65 to 67, so there may be a contradiction between what feels familiar and what the numbers reward. “The ones who end up waiting the extra couple of years usually do it after seeing how the numbers play out for their specific situation,” Kovar said.
Three Savvy Reasons to Grab Social Security Payments at FRA
Like any big financial decisions, there are upsides and downsides to collecting Social Security on or near your 67th birthday. These three financial factors may lead U.S. adults to take Social Security payments at full retirement age and likely be glad they did.Many wait to shed the earned income test.
One of the biggest reasons people wait for FRA is that they cannot take their benefits sooner. “The Social Security Administration imposes a rule on earnings limits that effectively forces people to wait until FRA if they earn too much income,” Brask noted.
Eliminating the earnings-test concern can be a big deal for working Americans who want to maximize SSA payments. “Once someone reaches FRA, earned income no longer causes Social Security benefits to be withheld under the retirement earnings test,” Drew Stevens, a wealth management and retirement specialist at St. Louis-based Wisdom to Wealth, told NTD.
The monthly check is significantly larger
Usually, Americans who take Social Security at full retirement age avoid the early-claiming reduction. “For someone born in 1960 or later, full retirement age arrives around age 67, and claiming at 62 instead of at FRA can reduce the monthly retirement benefit by as much as 30 percent,” Sevens noted.Larger income earners can put their spouses into a better financial position
Spousal protection is another reason to wait until full retirement age. “The higher earner's benefit becomes the survivor's benefit,” Gregory DuPont, JD, founder of Advocate Wealth Solutions, in Dublin, Ohio, told NTD. “Claiming early permanently shrinks what a surviving spouse receives. I've seen widows discover this years after the decision was made, when nothing can be done about it.”Make Sure To Take the Long View With Social Security
When choosing between retirement ages, the most common mistakes usually come from not looking at the full financial picture.Some people lean toward 65 because it's familiar; others lean toward 67 because it's the number they've heard most, “without really factoring in things like whether they're still working, how it might affect a spouse's benefits later, or what the tax situation looks like,” Kovar said.