Millions of retirees in the United States rely on Social Security to support their retirement years. While the system is widely used, not many people fully understand how it works or how small adjustments can significantly impact their monthly benefits. One of the most important decisions retirees face is when to begin collecting Social Security. Timing can make a big difference, potentially increasing monthly benefits by hundreds of dollars. Here’s how retirees could earn an additional $740 per month.
Understanding Social Security Benefits
Importance of Timing
The timing of when you start collecting Social Security has a substantial impact on your monthly payments. If you begin at the earliest age, 62, your benefits will be permanently reduced. On the other hand, waiting until age 70 can lead to a significant increase in your monthly payments—up to 32% higher.
Full Retirement Age (FRA)
The Full Retirement Age (FRA) varies based on when you were born, generally falling between 66 and 67. Starting benefits before or after this age directly affects your payment amounts. For instance, if you start collecting at age 62, you receive about 25% less than your full benefits, while delaying until 70 offers up to 32% more.
Practical Example
For example, someone who begins collecting at 62 could receive approximately $1,298 per month. However, by waiting until age 70, their monthly payments could increase to around $2,038—a difference of $740.
Benefits of Delaying Social Security
While many retirees may need their benefits earlier, delaying them provides a higher monthly income. A 2022 study by the National Bureau of Economic Research found that 99.4% of older adults could increase their total lifetime benefits by delaying their claims.
However, individual circumstances differ. Factors like health, savings, and personal goals must be considered when deciding the best time to start receiving benefits.
Additional Strategies to Maximize Benefits
Beyond simply delaying benefits, retirees can explore various strategies to maximize their Social Security income. These include:
- Spousal Benefits: Maximizing benefits based on a spouse’s earnings history.
- Divorcee Benefits: Leveraging ex-spouse benefits if applicable.
- Working While Receiving Benefits: Avoiding penalties by timing income from part-time work carefully.
Conclusion
Deciding when to begin collecting Social Security is a personal decision that depends on individual needs and goals. While delaying can increase monthly payments, it’s essential to weigh the pros and cons, taking into account both financial and lifestyle factors. By understanding your options, you can make an informed decision that aligns with your retirement plans.
FAQ’s
What is the earliest age to start collecting Social Security benefits?
The earliest age is 62.
How does Full Retirement Age (FRA) affect benefits?
Starting before or after FRA affects the amount received each month, with earlier claims resulting in lower benefits and later claims resulting in higher benefits.
Can delaying benefits really add $740 per month?
Yes, waiting until age 70 can increase monthly benefits by approximately $740 or more, depending on the individual’s circumstances.