Skip to comments.Should You Take Social Security at 62, 66, or 70?
Posted on 08/02/2018 9:22:46 AM PDT by Red Badger
Social Security benefits can be claimed at any point after a recipient turns age 62, and most Americans take their Social Security as soon as they can. Claiming benefits early can be smart, but it can pay off to wait. If you're deciding when to start receiving Social Security, here's what to consider. Estimate your expenses
Retirement usually means a big drop in income, and if you don't have a solid grasp on what your spending is going to look like in retirement, then you won't be able to make the best decision on when to claim.
Depending on who you talk to, experts usually recommend budgeting for 70% to 80% of your pre-retirement income to cover expenses in retirement. However, the exact amount you'll need depends on your specific situation.
According to the Bureau of Labor Statistics (BLS), retirees spend the most money on home mortgages and auto loans, so if those loans won't be paid off when you retire, you'll need to budget accordingly. Overall, the BLS reports that the average 65-plus household spends about $45,221 per year, and housing and transportation account for $15,711 and $6,830 per year, respectively.
Healthcare is another big expense in retirement, and it's usually smart to over-budget when it comes to planning for those expenses. If you're healthy, your costs might not increase significantly at first, but you'll likely require more healthcare as you get older, and that healthcare won't be cheap. Healthcare spending in over-65 households totals $5,877 per year, according to the BLS, including $4,029 for health insurance and another $694 for medicine. Fidelity Investments estimates that a couple retiring at 65 this year will fork out over $275,000 in healthcare expenses during their retirement, and ultimately, the tally could be tens of thousands of dollars higher than that if you need long-term care at some point, too. Social Security options
If you've paid into Social Security over a career lasting at least 10 years, there's a good chance you'll qualify for benefits.
You can claim your benefits when you turn 62, but you'll receive a reduced payment. If you go the claim-early route, apply three months before you turn 62, so that you can receive your first check in the month after you turn 62.
If you want to receive 100% of the benefit you're eligible for, you'll need to wait until you reach your full retirement age to claim. Your full retirement age depends on the year in which you were born, but for people turning 62 in 2018, it is 66 years and 4 months.
Your third option is to wait until after your full retirement age to claim so that you can receive delayed retirement credits. These credits increase your payment for every month beyond your full retirement age that you delay. Overall, delaying increases your benefit by 8% for every year you hold off, until age 70.
The following chart shows how much a Social Security recipient would receive if their full retirement age is 66, their benefit is $1,000, and they chose to claim benefits between age 62 and age 70.
Data source: Author's calculations.
While this example shows how benefits change depending on when you claim, the exact amount you'll receive in benefits is determined by a complex calculation based on your highest 35 years of earnings.
You can create a login here to view your actual Social Security benefit, but the average monthly Social Security check is $1,404 in 2018, and the average check paid to recipients age 62, age 66, or age 70 last year was $1,112.30, $1,382.78, and $1,510.49, respectively.
Once you know your expected Social Security income at age 62, age 66, and age 70 add to it any other sources of retirement income you'll receive, such as pensions and investment income. If you've thoroughly calculated your projected retirement expenses, then you should be able to use these numbers to determine the age at which you can reasonably expect to afford to retire. Important considerations
If you have ample income in retirement from other sources, it might make the most sense to embrace a claim-early and-invest strategy. As you can see in the following chart, waiting to claim benefits doesn't break even with taking benefits early until you reach your late 70s or early 80s, depending on when you claim. But if you claim benefits early and then invest that income, you could conceivably push that breakeven point back even further, depending on your annual returns.
Data source: Author's calculations.
It's also important to consider the impact of claiming decisions on your spouse's financial security after your death. If your widow and widower is full retirement age, they can receive 100% of your benefit amount after you pass away, but only up to what you would otherwise be receiving if you were still alive. Therefore, if you claim early and receive a smaller monthly benefit, it may not be enough money for your surviving spouse to maintain his or her lifestyle.
If you're working in a high-paying job (relative to what you earned early on in your career), you might want to delay claiming your benefit anyway. If you've already accumulated a 35-year work history, additional high-earning years will replace lower-earning years in your benefit calculation, thereby giving your full retirement age benefit a boost.
Furthermore, if you plan on working into your early 60s, then you should know that if your income exceeds limits, the IRS will tax some of your Social Security until you reach your full retirement age. In those cases, delaying when you claim so that you lower your income taxes might be a smart choice.
Overall, when to claim your Social Security benefits is one of the most complex, and important, choices you'll face leading up to retirement, so make sure you understand the various retirement strategies available to you.
I’m taking mine at 66.
Do you have to sign up for Medicare when you sign up for Social Security?
Can you take Social Security WITHOUT joining Medicare?
Better check the SS website, depending on your year of birth, it may be different. For me, 66 year + 2 months is considered full retirement age................
I don’t know..................FReepers?........................
Started mine at 64. Laid off, retired same day. The next week I got my first retirement check and the week after my first SS check. Cha Ching! For me the break even point was something like 12 years down the road so I figured I needed the smaller amount now. Not that much smaller in my case. Good luck.
Same here. We did the math regarding waiting, it would take a very long time before we reach the break even point.
At 66 I can take SS and earn all the money I want without having to give any back. :)
For me, it’s about being able to earn AND collect SS, which is why I’ll wait ‘till 66, which is just over a year from now.
These kinds of articles never mention the possibility that SS payouts would be reduced in the coming years. With each passing year and SS drifts toward insolvency on paper, that possibility increases.
Medicare happens at 65. As I remember 6 years ago, I had to take it.
As I understand it, you must sign up for Medicare at 65 years of age. When you trigger Social Security has nothing to do with signing up for Medicare. In fact, if you sign up for SS before age 65, you'll automatically get signed up for Medicare when you turn 65. Folks here will correct me I'm sure if I'm wrong, but this is how I understand it.
I took mine at 62.5, not knowing how long I will live.
How long will you live? If you plan on living a long time - wait.
If you are obese, you smoke and drink, have a poor family history, and are generally not in good health now? Take Social Security as soon as possible.
Yeah, I had to hassle with SS for 3 years until I hit 67 about how much I was making and taking out of my 401k. All good now. I still have to fight with the VA about my income though. Oddly, I don’t remember me putting any limitations on the US Navy back in ‘67 about what they could and couldn’t do to me or with me. Weird huh?
Kind of a moot argument to me and my generation since I doubt we’ll ever see a penny of it by the time we could quality. Of course that won’t stop the government from forcing us to pay in to this scam :S
But it’s in a lockbox!
Algore told us so!...................
At 66, my SS will be around $2500 a month and, coupled with my wife’s $900, and no income tax on that, we can live pretty comfortably in rural KY. Our goal is to pay off the mortgage and all other expenses before I quit my job.
Wondering if you turn 66 and are eligible to collect SS and are still working and have healthcare, are you required to take Medicare.
I had a choice between getting a bit more from SS if I retired at 66 or 70, or retiring now at 56. No contest.
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