When's the best age to begin collecting Social Security retirement benefits? That's a question the Social Security Administration (SSA) is asked frequently. The agency's answer: "There's not a single 'best age' for everyone and, ultimately, it's your choice."
This response is correct. However, if you want to maximize how much money you receive from Social Security, there is an optimal answer for most Americans. Statistics say there's one best age to claim Social Security.
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Social Security's big trade-off
The earliest you can claim Social Security retirement benefits is age 62. Why shouldn't everyone begin collecting benefits as soon as possible? SSA imposes an early retirement penalty.
For every month you retire before your full retirement age (FRA) up to 36 months, your benefit will be reduced by five-ninths of 1%. If you retire more than 36 months before your FRA, your benefit will be reduced by five-twelfths of 1%. The full retirement age (FRA) for anyone born in 1960 or later is 67. This means that your retirement benefit for claiming at age 62 will be 30% lower than your benefit at age 67. Ouch.
What's more, you can receive even higher benefits by holding off on collecting until you reach age 70. SSA offers a delayed retirement credit. For anyone born in 1943 and later, your retirement benefit will increase by two-thirds of 1%, or 8% per year. If you wait until age 70 to begin receiving retirement benefits, your benefits will be 24% higher than if you started receiving them at a full retirement age of 67.
Every American must consider Social Security's big trade-off in deciding when to claim retirement benefits. You can begin receiving your benefits sooner, but your monthly amount will be reduced. You can wait until later to receive a higher benefit, but you'll have to rely on other sources of income in the meantime.
What a detailed study found
Quite a few analyses have been conducted through the years about the optimal age for claiming Social Security retirement benefits. However, the most detailed and thorough one I've found was a study done by David Altig of the Federal Reserve Bank of Atlanta and Laurence Kotlikoff and Victor Yifan Ye of Boston University. In November 2022, these three economists reported their findings in a working paper for the National Bureau of Economic Research (NBER).
This study used a statistical tool called the Fiscal Analyzer, developed by Economic Security Planning, Inc. The Fiscal Analyzer incorporated lifespan uncertainty, cash-flow constraints, and all major federal and state tax and transfer programs (notably Medicare and Medicaid).
What did this detailed study find? Nearly every American (over 99%) who hasn't begun collecting Social Security retirement benefits should wait beyond age 65 to do so. More than 90% should wait to claim Social Security until age 70.
To be sure, most people don't wait until age 70 to collect their retirement benefits. Altig, Kotlikoff, and Ye noted that only 10.2% hold off that long. But claiming benefits earlier than 70 leaves a lot of money on the table.
Why defy the statistics?
The best age, statistically, to claim Social Security retirement benefits is 70. So why even consider defying the statistics? Two reasons especially stand out.
First, you're not a statistic. You know your healthcare status better than economists analyzing aggregate data. If you think you won't live past your mid-70s because of poor health, family history, etc., collecting retirement benefits earlier could be the right decision for you.
Second, money isn't everything. You could place a higher value on being able to travel and do other things you'd like to do by claiming retirement benefits earlier than you do on increasing your monthly benefit.
The best age to start receiving retirement benefits varies from one individual to another. And SSA was right: Only you get to decide when's the right time for you.
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