Knowing the impact of your claiming age on Social Security benefits is crucial for your financial planning. The timing of when you start claiming benefits can lead to significant variations in both your monthly payments and lifetime payouts. Whether you’re already retired or just starting your career, this decision can greatly influence your financial security during retirement.
Social Security Reliance
For many Americans, Social Security is a key source of income during retirement. Gallup surveys reveal that between 80% and 90% of retirees rely on Social Security to some extent. Similarly, 76% to 88% of non-retirees expect to need Social Security benefits when they retire. This reliance underscores the importance of maximizing these benefits by carefully considering your claiming age.
Key Components
To maximize your Social Security benefits, it’s essential to know the four key factors that determine your monthly payments:
1. Work History: The SSA calculates your benefits based on your 35 highest-earning years. Working fewer than 35 years can reduce your benefits, as the SSA averages in zeros for missing years.
2. Earnings History: Higher lifetime earnings generally result in higher Social Security benefits. Thus, increasing your earnings over your career can lead to more substantial retirement benefits.
3. Full Retirement Age: Your full retirement age (FRA) is when you’re eligible to receive 100% of your Social Security benefits. Your FRA is determined by your birth year and typically ranges between 66 and 67 years old.
4. Claiming Age: The age at which you start claiming benefits has the most significant impact on your monthly payments. While you can start collecting benefits as early as age 62, delaying your claim can increase your payments. For every year you delay beyond your FRA, your benefits grow by approximately 8%, up until age 70.
Impact of Claiming Age
Choosing when to claim Social Security benefits is a personal decision that depends on your financial situation, health, and life expectancy. To help you know the impact, here’s a breakdown of how benefits change depending on your birth year and claiming age.
Benefits by Birth Year
| Birth Year | Age 62 | Age 63 | Age 64 | Age 65 | Age 66 | Age 67 | Age 68 | Age 69 | Age 70 |
|---|---|---|---|---|---|---|---|---|---|
| 1943-1954 | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% | 132% |
| 1955 | 74.2% | 79.2% | 85.6% | 92.2% | 98.9% | 106.7% | 114.7% | 122.7% | 130.7% |
| 1956 | 73.3% | 78.3% | 84.4% | 91.1% | 97.8% | 105.3% | 113.3% | 121.3% | 129.3% |
| 1957 | 72.5% | 77.5% | 83.3% | 90% | 96.7% | 104% | 112% | 120% | 128% |
| 1958 | 71.7% | 76.7% | 82.2% | 88.9% | 95.6% | 102.7% | 110.7% | 118.7% | 126.7% |
| 1959 | 70.8% | 75.8% | 81.1% | 87.8% | 94.4% | 101.3% | 109.3% | 117.3% | 125.3% |
| 1960+ | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
Average Benefits by Age
While the percentage increase is helpful, knowing the average benefit amounts can provide clearer insight:
- Age 62: Retirees starting at 62 receive lower benefits due to early claiming. The average is about $1,298.26.
- Age 66: At full retirement age, the average benefit is $1,739.92.
- Age 70: Those who wait until 70 enjoy the highest average benefit of $2,037.54, a significant increase over early claiming.
These figures highlight the substantial differences in benefits based on when you start collecting. Delaying your claim can lead to significantly higher monthly payments, making a strong case for waiting if possible.
Deciding when to start claiming Social Security benefits is a critical financial decision. By knowing the impact of your claiming age and the factors that influence your benefits, you can make informed choices that align with your retirement goals. Whether you start early, at your FRA, or delay until 70, the decision should be based on your personal circumstances and financial needs.
FAQs
How does my claiming age affect Social Security benefits?
The later you claim, the higher your monthly benefit will be.
What is full retirement age (FRA)?
FRA is the age when you can receive 100% of your Social Security benefits, usually 66-67.
Can I work less than 35 years and still maximize benefits?
No, working fewer than 35 years can reduce your average benefit amount.
What are the average Social Security benefits at age 70?
At age 70, the average benefit is about $2,037.54.
Is claiming Social Security early a good idea?
It depends on your financial needs and life expectancy; early claiming reduces benefits.
