A Guide on Taking Social Security (2024)

Deciding when to take Social Security depends heavily on your circ*mstances. You can start taking it as early as age 62 (age 60, if you're a survivor of another Social Security claimant or at any age, if you're claiming a disability), or you can wait until you've reached full retirement age or age 70 based on your work history. While there's no "correct" claiming age for everybody, the rule of thumb is that if you can afford to wait, delaying Social Security can pay off over a long retirement. Here are some guidelines to consider.

What's full retirement age?

Full retirement age (also known as "normal retirement age") is when you're eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: For anyone born in 1960 or later, full retirement age is 67. For those born in 1955 through to the end of 1959 (technically, January 1, 19601), full retirement age ranges between 66 and 2 months and 66 and 10 months. If you were born before 1955, you've already reached age 66 and full retirement age.

Retirement ages for full Social Security benefits

If you were born in... Your full retirement age is...
1954 or earlier You've already hit full retirement age
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67
Source

SSA.gov

What if I take benefits early?

If you choose to take your own (not your spouse's) Social Security benefit before your full retirement age, be aware that the benefit is permanently reduced by five-ninths of 1% for each month. If you start more than 36 months before your full retirement age, the worker benefit is further reduced by five-twelfths of 1% per month for the rest of retirement.

For example, let's assume you stop working at age 62. If your full retirement age is 67 and you elect to start benefits at age 62, the reduced benefit calculation is based on 60 months. So, the reduction for the first 36 months is 20% (five-ninths of 1% times 36) and then another 10% (five-twelfths of 1% times 24) for the remaining 24 months. Overall, your benefits would be permanently reduced by 30%.

Effect of taking retirement benefits early (DOB: Jan. 2, 1960)

A Guide on Taking Social Security (1)

Source: SSA.gov

1Represents Full Retirement Age (FRA) based on DOB January 2, 1960

2PIA = The primary insurance amount is the basis for benefits that are paid to an individual

What if I delay taking my benefits?

If you retire sometime between your full retirement age and age 70, you typically earn a "delayed retirement" credit (DRC) for your own benefits (but not spousal benefits). For example, say you were born in 1960, and your full retirement age is 67. If you start your benefits at age 69, you would receive a credit of 8% per year multiplied by two (the number of years you waited). This means your benefit would be 16% higher than the amount you would have received at age 67. (This doesn't include any potential additional cost of living adjustments for inflation from age 67 to 69.)

Effect of delaying retirement benefits (DOB: January 2, 1960)

A Guide on Taking Social Security (2)

Source: SSA.gov

1Represents Full Retirement Age (FRA) based on DOB January 2, 1960

2PIA = The primary insurance amount is the basis for benefits that are paid to an individual

That higher baseline would last for the rest of your retirement and serve as the basis for future increases linked to inflation. While it's important to consider your personal circ*mstances—it's not always possible to wait, particularly if you are in poor health or can't afford to delay—the benefits of waiting can be significant.

Be aware that if you decide to wait past age 65, you may still need to sign up for Medicare. In some circ*mstances your Medicare coverage may be delayed and cost more if you don't sign up at age 65. If you start Social Security benefits early, you'll automatically be enrolled into Medicare Parts A and B when you turn age 65.

Your annual Social Security statement will list your projected benefits between age 62 to 70, assuming you continue to work and earn about the same amount through those ages. If you need a copy of your annual statement, you can request one or view it online on the Social Security Administration (SSA) portal.

How should I decide when to take benefits?

Consider the following factors as you decide when to take Social Security.

Your cash needs

If you're contemplating early retirement and you have sufficient resources (an investment portfolio, a traditional pension, and other sources of income), you can be flexible about when to take Social Security benefits.

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 working part-time until you reach your full retirement age—or even longer—so that you can maximize your benefits.

Your life expectancy

Taking Social Security early reduces your benefits, but you'll also receive monthly checks for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but delaying means each check will be larger.

If you think you'll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if you're in poor health or have reason to believe you won't beat the average life expectancy, you might decide to take what you can while you can.

A quick note about life expectancy

According to the SSA, the average life expectancy for a 65-year-old is around 84 years for males and 87 for females. Married individuals tend to live even longer, with a greater than average probability of at least one spouse living to age 90. To compute your own life expectancy, use the SSA's life expectancy calculator.

Remember, though, that the average is just that—an average. If you expect to have a shorter life expectancy, then early withdrawals might make sense. If you live longer than average, starting Social Security later can be particularly beneficial.

Your marital status

If you're married, start by taking your spouse's age, health, and benefits into account, particularly if they are the higher-earning spouse. For example, at full retirement age, you can take either 100% of your own retirement benefits or 50% of your spouse's, whichever is higher.

If you're divorced and you were married for 10 years or more, you can receive benefits based on your ex-spouse's Social Security record (up to 50% of their full retirement benefits). Take note that if your ex-spouse uses your record, this won't impact your or your current spouse's benefits.

If you're widowed, you can receive either your own retirement benefits or up to 100% of your spouse's benefits, whichever is higher. It's important to make the most effective use of the combination of a worker, spousal, and survivor benefit, working with a financial planner if possible.

Your employment status

Earning a wage (or even self-employment income) can reduce your benefit temporarily if you take Social Security early. If you're still working and you haven't reached your full retirement age, $1 in benefits will be deducted for every $2 you earn above the annual limit ($21,240 in 2023).

In the year you reach your full retirement age, the reduction falls to $1 in benefits for every $3 you earn above a higher limit ($56,520 in 2023). However, starting the month you hit your full retirement age, your benefits are no longer reduced no matter how much you earn.

Again, any reduction in benefits due to the earnings test is only temporary. You receive the money back in the form of a recalculated higher benefit beginning at full retirement ages—so don't use the reduction as the sole reason to cut back on working or worry about earning too much.

To wait or not to wait?

Consider taking benefits earlier if . . .

  • You're no longer working and can't make ends meet without your benefits.
  • You're in poor health and don't expect the surviving member of the household to make it to average life expectancy.
  • You're the lower-earning spouse, and your higher-earning spouse can wait to file for a higher benefit.

Consider waiting to take benefits if . . .

  • You're still working and make enough to impact the taxability of your benefits. (At least wait until your normal retirement age so benefits aren't further reduced due to earnings.)
  • Either you or your spouse are in good health and expect to exceed average life expectancy.
  • You're the higher-earning spouse and want to be sure your surviving spouse receives the highest possible benefit.

What about taxes on Social Security?

Social Security benefits may be taxable, depending on your "combined income." Your combined income is equal to your adjusted gross income (AGI), plus non-taxable interest payments (e.g., interest payments on tax-exempt municipal bonds), plus half of your Social Security benefit.

As your combined income increases above a certain threshold (from earning a paycheck, for instance), more of your benefit is subject to income tax—up to a maximum of 85%. For help, talk with a CPA or tax professional.

In any case, if you're still working, you may want to postpone Social Security either until you reach your full retirement age or until your earned income is less than the annual limit. In no situation should you postpone benefits past age 70.

What if I change my mind?

If you receive Social Security benefits at a reduced rate but then change your mind, you have the option of withdrawing your application within the first 12 months of receiving benefits and paying back to the government what you've already received (including Medicare payments and taxes deducted). Then, you could restart benefits at a later date to take advantage of a higher payout. Be aware that you're limited to one withdrawal per lifetime.

For example, let's say you elected to receive early benefits at age 62 but then decided to go back to work at age 63. You could withdraw your Social Security application, pay back the years' worth of benefits you received, go back to work, and then wait until your full retirement age to restart your benefit checks at a higher level.

Once you reach full retirement age, another option is to voluntarily stop benefits at any point before age 70 to receive delayed retirement credits (spousal benefits will be stopped as well). Benefits will automatically restart at age 70 at a higher amount—unless you choose to start taking benefits before then. Note that when you withdraw your application or stop your benefits after full retirement age, you must specify if your Medicare coverage—if you have it—should be included in the withdrawal.

What is the future of Social Security?

As of March 2023, the Social Security Trust Fund is projected to have enough resources to cover all promised benefits until 2034 when, absent a change from Congress, benefits would need to be cut for all current and future beneficiaries to about 80% of scheduled benefits.2 Over the longer term, changes to the full retirement age or means testing—which could reduce or eliminate benefits based on your other income sources—may also be considered.

If you're skeptical about the future of Social Security or wary of potential changes, you may be tempted to start benefits early, assuming that it's better to have something than nothing. Regardless of your situation, if you're concerned about the future prospects for Social Security, then that's a good reason to save more—and earlier—for your retirement.

The bottom line

If you have a choice and are in good health, think seriously about waiting as long as you can to take your benefits (but no later than age 70). A long retirement coupled with uncertainty about markets and inflation are the biggest risks. Delaying Social Security, if you can, is effectively an insurance policy against those challenges.

Your situation may differ, however, and there are many factors to consider. Get help from a financial planner if you need it.

1If your birthday is on the 1st of the month, the SSA determines your benefit and full retirement age as if your birthday were in the previous month (December of the year before if your birthday is on January 1).

2"The 2023 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds", Social Security Administration, 03/31/2023, https://www.ssa.gov/OACT/TR/2023/.

As an expert in retirement planning and Social Security, my knowledge extends beyond the basic principles outlined in the provided article. I have a deep understanding of the intricacies of the Social Security system, including rules, regulations, and the broader implications of claiming strategies. To establish my expertise, I'll draw on my comprehensive knowledge of the concepts discussed in the article.

The article delves into the critical decision of when to start taking Social Security benefits, emphasizing that this choice heavily depends on individual circ*mstances. Let's break down the key concepts discussed in the article:

1. Full Retirement Age (FRA):

  • FRA, also known as "normal retirement age," is the age at which individuals become eligible to receive full Social Security benefits.
  • FRA varies based on the year of birth, ranging from 65 to 67.
  • The article provides a detailed table outlining FRA based on birth year, with specific months for those born between 1955 and 1960.

2. Effects of Taking Benefits Early:

  • If an individual chooses to take Social Security benefits before reaching FRA, the benefit is permanently reduced.
  • The reduction is calculated based on the number of months before FRA and can result in a substantial permanent reduction in benefits.

3. Effects of Delaying Benefits:

  • Delaying benefits between FRA and age 70 can lead to a "delayed retirement credit," resulting in an increased benefit.
  • The article illustrates an example of an individual born in 1960 who starts benefits at age 69, earning an 8% credit per year of delay.

4. Factors Influencing the Decision:

  • Cash needs: Individuals with sufficient resources may have flexibility in choosing when to take benefits.
  • Life expectancy: Consideration of life expectancy is crucial; waiting may result in larger monthly checks but fewer overall payments.
  • Marital status: Spousal benefits and strategies for married, divorced, or widowed individuals are discussed.
  • Employment status: Working while receiving benefits may lead to temporary reductions, with a gradual phase-out based on income.

5. Taxes on Social Security:

  • Social Security benefits may be taxable based on "combined income," which includes adjusted gross income, non-taxable interest payments, and half of Social Security benefits.
  • Strategies to manage taxable income, including delaying benefits until reaching full retirement age, are highlighted.

6. Flexibility and Changing Decisions:

  • Individuals have the option to change their minds within the first 12 months of receiving benefits.
  • Withdrawal of the application allows for paying back benefits and restarting at a later date for a higher payout.

7. Future of Social Security:

  • The article mentions the current status of the Social Security Trust Fund and projections until 2034.
  • Potential changes to the full retirement age or means testing are considered, emphasizing the importance of saving for retirement.

8. Bottom Line and Recommendations:

  • The article concludes with a recommendation to delay benefits if possible, considering the risks of a long retirement, market uncertainties, and inflation.
  • Individual situations may vary, and the importance of seeking advice from a financial planner is emphasized.

In summary, the information provided in the article is comprehensive, covering key aspects of Social Security decisions and retirement planning. It offers valuable insights for individuals to make informed choices based on their unique circ*mstances.

A Guide on Taking Social Security (2024)

FAQs

What you should know before taking Social Security? ›

Prepare for Social Security benefits
  • Eligibility. Answer a few questions to see if you're eligible for Social Security benefits right now.
  • Get a benefits estimate. See estimates for various benefits based on your earnings and when you apply.
  • Plan for retirement. ...
  • Record of earnings.

What is the #1 reason to take Social Security at 62? ›

1. You're Planning Your End-of-Life Care. Your Social Security benefits stop paying at your death, so if you die before collecting benefits, you'll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income instead.

What does Suze Orman say about taking Social Security at 62? ›

As we have discussed, you are eligible to start claiming your benefit when you turn 62. But the benefit you receive at 62 will be permanently lower than if you wait. Every month past age 62 you don't claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit.

What is the 10 year rule for Social Security? ›

If you've worked and paid Social Security taxes for 10 years or more, you'll get a monthly benefit based on that work.

What is the Social Security 5 year rule? ›

The Social Security five-year rule is the time period in which you can file for an expedited reinstatement after your Social Security disability benefits have been terminated completely due to work.

How do you get the $16728 Social Security bonus? ›

Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.

At what age is Social Security no longer taxed? ›

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

Is it better to collect Social Security at 62 or 67? ›

You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.

What is the average Social Security check at age 62? ›

If people born after 1960 claim their benefits the month they turn 62, they'll get only 70% of what they would have received had they waited until the full retirement age of 67. The average monthly payment of $1,782 drops by 30% during the first month of eligibility to $1,247.40.

What does Suze Orman say about taking Social Security? ›

Each month you wait to claim increases your monthly amount for the rest of your life. If you can live off of your 401k or other retirement income for 6-12 months and wait to claim Social Security, you end up with a longer benefit for life.”

How much money will I lose if I retire at 62 instead of 65? ›

A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30 percent. Starting to receive benefits after normal retirement age may result in larger benefits.

What is the disadvantage of taking Social Security at 62? ›

Depending on what someone's retirement age is, the decision to collect Social Security early could result in a monthly reduction of about 20 to 30 percent of what they would have gotten if they waited until full retirement age.

When my husband dies do I get his Social Security and mine? ›

In many cases, a surviving spouse can begin receiving 1 benefit at a reduced rate and allow the other benefit amount to increase. If you will also receive a pension based on work not covered by Social Security, such as government or foreign work, your Social Security benefits as a survivor may be affected.

What is the Social Security bonus trick? ›

Social Security doesn't randomly award money to people. And there's no way to legally trick Social Security into giving you more money. Instead, Social Security benefits are paid out according to a specific formula used by the Social Security Administration, which is based on your lifetime earnings.

Why retiring at 62 is a good idea? ›

You Have the Chance to Enjoy it Longer

Retiring early gives you more time to live the retirement life you've always dreamed of, be that pursuing hobbies, seeing the world, spending time with grandkids, or absolutely anything else you want.

What is the best age to take Social Security benefits? ›

You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.

What questions to ask before applying for Social Security? ›

10 Common Questions About Social Security
  • What Is Social Security?
  • When Am I Eligible?
  • How Is Eligibility Determined?
  • How Much Do I Pay in?
  • How Much Will I Get?
  • Can I Get Social Security If I Work?
  • How Does the Spousal Benefit Work?
  • Do I Owe Taxes on Social Security?

How long does it take to get your first Social Security check after applying? ›

Timing your first benefit payment

Your first check won't arrive until the month after the one you pick in your application. You can apply any time up to four months before the month you pick. For example, you want your first check in April.

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