Social Security is the primary source of retirement income for many people, and for some, it’s the only source. You can start receiving Social Security benefits at age 62, or you can delay your benefits until age 70, which will increase your monthly total. Although delaying your benefits until you reach 70 may seem like a good thing because of the increased benefits, it can also be overkill. Here’s why.
Waiting may not help
The amount of your Social Security benefit in retirement largely depends on your retirement age. Social Security bases this feature on your full retirement age, which can vary depending on your year of birth.
|Year of Birth||full retirement age|
|From 1943 to 1954||66|
|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|
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If you retire at full retirement age in 2022, the maximum monthly benefit is $3,345; If you retire early at 62, that would be $2,364; If you delay your benefits until 70, your maximum benefits rise to $4,194. The jump in benefits by waiting until age 70 may seem significant, but it’s a bit underwhelming. Your checks will be larger, but you will get them for much less than you would by taking benefits early or at full retirement age. If your full retirement age is 67, there are 60 months between 62 and 67 and 96 months between 62 and 70 – that’s a good amount of missed checks.
Let’s say you were born in 1970 and currently earn $80,000. Using the Social Security Benefits Calculator, here’s your expected monthly salary and the total amount you would have earned at certain ages:
|The age at which you begin receiving benefits||monthly benefit||Total received 80||Total received 85|
|67||2410 US dollars||$375,960||$520,560|
Using these numbers, you can see that by age 80, delaying your benefits until age 70 would have resulted in less total benefits than you had at 70. By age 85, the total benefits may be more, but there is no way to know if someone will live Long enough to make the trade-off make sense.
Getting the most out of retirement
Another key aspect here is the ability to get the most out of retirement. You have no way of knowing when you will die, so delaying benefits for years can affect your quality of life in your early retirement years. Some new retirees may want to travel and embrace new passions and hobbies, and doing so will inevitably cost money.
Instead of deferring Social Security benefits until age 70, many will find it more rewarding to receive their benefits early — even with lower monthly payments — so they can have the money to take on these new projects and passions. You have worked hard and paid Social Security taxes throughout your career; Give yourself a chance to reap those benefits as quickly as possible.
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