Deciding the age at which to start receiving Social Security benefits will determine the rest of the years you have left to live (which are getting more and more, because we are increasingly long-lived and healthy generations), which makes this decision one that merits reflection and, almost, juggling numbers.
Everyone is different in terms of the retirement savings they have, and the circumstances that influence the numbers that, in the end, result in how much you are going to collect. However, consulting research results can be useful to guide decision-making. In a recently released meticulous study, researchers analyzed claim decisions among retirees to determine the “optimal” age to start receiving benefits. This sheds light on the most favorable and unfavorable ages to start receiving Social Security.
The Impact of Age on Benefits: When to Start?
To start receiving full benefits, you must first understand what your full retirement age (FRA) is. This age varies depending on the year of birth, but it is 67 years for all people born in 1960 or later. Let’s look at this list first, and then we follow:
- If you were born between 1943 and 1954, your FRA is 66
- If you were born in 1955, your FRA is: 66 years and 2 months
- If you were born in 1956, your FRA is: 66 years and 4 months
- If you were born in 1957, your FRA is: 66 years and 6 months
- If you were born in 1958, your FRA is: 66 years and 10 months
- If you were born in 1960 and after, your FRA is: 67 years old
But, you can start claiming your Social Security benefits earlier than that, with a little (not so good) catch: You can apply from the age of 62, but the benefits you would receive if you waited for your FRA would be reduced by 30%. Per instance, if your check to your FRA is projected to be $1,500, if you retire at 62 you’re going to collect just $1,050, a cut of $450.
Waiting Until 70 Years Old to Claim Retirement: Should I Do It?
Let’s imagine John, a fictional retiree who has his Full Retirement Age (FRA) at 66 years and 2 months. John has decided to wait until he’s 70 to start receiving his monthly Social Security check, hoping to increase the amount he receives each month. Initially, his monthly ((fictional)) check would be $2,000 if you started receiving it at the age of 66 years and 2 months.
To calculate how much John’s monthly check will increase by waiting until age 70, we first need to understand how the delayed retirement increase works. For each year that John delays his claim beyond his FRA, his monthly check will increase by approximately 8%.
Since John waits until age 70, that means he has delayed his claim by 3 years and 10 months beyond his FRA (70 years – 66 years and 2 months = 3 years and 10 months).
Now, let’s calculate how much his monthly check will increase:
- For each year of delay, the increase is 8%. So, for the 3-year delay, we have: 3 years x 8% = 24% increase.
- Then, for the additional 10 months of delay, we calculate a proportional fraction of the 8%: (10 months / 12 months) x 8% = 6.67% additional increase.
- Adding both increases: 24% (for 3 years) + 6.67% (for 10 months) = 30.67% total increase.
- We are now applying this increase to the initial $2,000 check amount: $2,000 x 30.67% = $613.40 monthly increase.
- Therefore, if John waits until age 70 to start receiving his monthly check, his monthly payment would increase by about $613.40, reaching a total of about $2,613.40 per month