Everything you need to know about when to claim Social Security | Smart Switch: Personal Finance

(Matthew Frankel, CFP®)

If you qualify for Social Security retirement benefits, which almost all American workers do, you can choose to start collecting them at age 62 or until age 70, or anywhere in between. The age at which you apply for Social Security will be used to determine how much money you initially receive each month, so it’s an important financial decision.

In this article, we’ll look at the concept of full retirement age, what happens if you apply for Social Security before or after your full retirement age, and other important information you need to know about when to apply for Social Security and what it means. for you.

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What is your full retirement age?

Your Social Security retirement benefit is determined by a formula based on your career earnings. But this formula is only used to determine a number called the primary insurance amount, or PIA. This is the amount you can expect to receive if you claim benefits at your full retirement age.

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Many Americans mistakenly believe that full retirement age is 65, and to be fair, it once was. But your full retirement age for Social Security purposes depends on when you were born and ranges from 66 to 67. Here’s a quick guide:

year you were born

Your full retirement age

1954 or earlier

66 years


66 years, 2 months


66 years, 4 months


66 years, 6 months


66 years, 8 months


66 years, 10 months

1960 or later

67 years

Data source: Social Security Administration.

What if you apply for Social Security at any other age?

To be sure, very few people actually claim Social Security on their exact full retirement age. In fact, the two most common ages to claim Social Security are 62 (as soon as possible) and 65 (Medicare eligibility).

However, full retirement age is still an important concept to be aware of, as it determines whether your benefit will be adjusted up or down when you claim it. The Social Security Administration has three age-related guidelines:

  • If you claim early, your benefit will be permanently reduced by 6.67% for each year you claim early, up to three years before you reach full retirement age.
  • If you claim more than three years before your full retirement age, your benefit will be reduced at a rate of 5% per year beyond three years, until age 62.
  • if you claim later your full retirement age, your benefit will be permanently increased by 8% for each year you expect your PIA, until age 70. And it is important to mention that the three rules are prorated monthly; In other words, if you wait a month or two after the FRA to claim, it will have a positive impact on your benefit.

This is how this works. Let’s say based on your work history, your PIA is $2,000 per month. So here’s what you’d get if you claimed exactly at full retirement age. We’ll also say for simplicity that your full retirement age is 67.

If you claim at age 62 (five years earlier), your benefit would be reduced by 6.67% for each of the first three years earlier and 5% for the other two, for a total reduction of 30%. Your monthly benefit of $2,000 would be adjusted to $1,400.

If you claim at age 70 (three years late), your benefit would increase by 8% for each of the three years you chose to wait, for a total increase of 24%. Your $2,000 PIA would become $2,400 per month when you start receiving checks.

When should you fill out the application?

You can apply for benefits (which you can easily do online) up to four months before you want your Social Security benefits to start. For example, if you want your benefits to start in January 2023, you can apply as early as September 2022. And it’s a good idea to apply as soon as possible once you know when you want to claim benefits, to avoid problems. delays

It is also important to note that Social Security benefits are paid one month late. In other words, you won’t receive your Social Security payment for January until February. So keep this in mind for budgeting purposes.

when should you claim social security?

Every situation is different. For some people it may make excellent financial sense to claim at age 62, and for others it is better to wait as long as they can. One thing to keep in mind is that unless you have a pension plan, Social Security is likely to be the only guaranteed, inflation-protected stream of income you’ll have when you retire. While it doesn’t always make sense to wait, keep this in mind when deciding what’s best for you.

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