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Turning 65 is a huge milestone that used to mean retirement. However, today, the full retirement age is closer to 67 for most individuals (though it does depend on your age). That said, the Social Security Administration allows you to start drawing benefits at 62, meaning that you could absolutely start drawing at 65.
Drawing before full retirement age permanently reduces your benefits, though. How much depends on how early you draw compared to your full retirement age. You can use the SSA's online calculator to help determine exactly how much your benefit would decrease.
Traditional wisdom holds that you should wait until full retirement age for maximum benefits. However, for some retirees, claiming Social Security at 65 is the smartest financial move. Despite lower lifetime benefits, claiming Social Security at 65 can be the smartest financial decision for retirees who prioritize immediate financial security and flexibility.
We'll delve deeper into this concept below, helping you figure out if claiming at 65 is a suitable strategy for you.
The Traditional View: Waiting for Maximum Benefits
Typically, the recommendation is to put off retirement as long as possible.
The most common advice for retirees is to wait until full retirement age to get your total monthly benefit. As we explained, retiring before your full retirement age lowers your monthly benefit. Your full retirement age is based on your birth year. For most retirees today, it's around 67.
You can also delay retirement past full retirement age, allowing you to increase your monthly benefit. You continue to acquire "delayed retirement credits" until 70 when your benefit is officially maxed out based on your income.
This strategy allows you to get a bigger monthly check, but it doesn't necessarily give you the biggest lifetime benefit. As we discussed in our article about why claiming at 70 isn't a good decision , the bigger monthly benefit does not necessarily offset the number of years you weren't claiming, especially if your monthly benefit is lower.
How Claiming Age Affects Your Benefits
What age you claim at significantly impacts how much money you'll receive.
Let's say you're eligible for $1,840 a month if you wait until full retirement age. By claiming at 65, that benefit would be reduced to $1,560. Claiming at 70 would increase your monthly benefit to $2,426.
The current life expectancy in the United States for men is only 74. Therefore, if a man claims at 64, his lifetime benefit would be $168,480. If he claimed at 70, it would only be $116,448. That's much lower than claiming at 65. Plus, he'd also get another five years of retirement!
It's a little different for women, as the life expectancy is 80. Therefore, if a woman delays until 70, she can expect to receive $291,120 over the next ten years. If she retired at 65, she'd receive a lifetime benefit of $280,800 - slightly lower than if she delayed.
(Of course, all of this assumes that everyone lived exactly to retirement age, which isn't the case. The longer your life expectancy, the more sense it makes to delay retirement. The shorter your life expectancy, the more sense it makes to claim early. Because no one knows their life expectancy exactly, you should make an educated guess based on your health, family history, and gender.)
As you can see, trying to maximize your lifetime benefits doesn't always mean delaying retirement.
Why Claiming at 65 Can Be Advantageous
If you want to be more active during yoru retirement, claiming a few years early may be the best decision.
We've already examined how when you claim affects how much you can expect to receive. However, there is more to claiming at 65 than just trying to maximize your lifetime earnings. Claiming at 65 makes particular sense to those who prioritize:
Immediate Financial Security
For many retirees, transitioning into retirement can create a financial gap. Social Security can take several months to be approved, assuming that all the paperwork is correct the first time. It can take even longer if you have to appeal or provide extra paperwork. Claiming Social Security at 65 ensures you have time to navigate the process and get everything figured out.
It also ensures that you have a guaranteed income stream in case you need to retire early or change your plans. Health problems and economic strain can lead to early retirement, even if you originally planned to retire at full retirement age.
Sometimes, there may be a gap between retirement and other income streams, too. For instance, pensions may not start the second you retire. Social Security also helps you overcome this gap.
It can also reduce your financial stress and anxiety. Going from working full-time to retirement can be a huge, stressful jump. Getting some Social Security checks before you fully retire can help you ease into retirement with less stress.
Increased Flexibility
Things change. That's just a fact. Claiming Social Security slightly before full retirement age can help you be more flexible about your retirement date. You may be able to drop down to part-time work for a few years as you transition slowly out of the workforce. If you have health problems, it could also help you adjust financially if you need to retire earlier than you originally planned.
Even if you decide to work full-time, claiming your Social Security early can give you some extra wiggle room, allowing you to pursue passions that you might not have been able to pay for otherwise.
You could also save your Social Security check, allowing you to access a larger sum of money at once in the case of an emergency (or trip expenses). This is a common strategy for retirees who are planning a retirement trip shortly after full retirement age.
Strategies to Optimize Early Claiming
Spouses will need to plan together on when to draw benefits. Sometimes, it makes sense for one spouse to claim early and the other to claim later.
Claiming Social Security early can have advantages, but it's important to do it right. There are several ways to minimize the impact of the reduced benefits:
- Spousal Benefits: If you're married, your spouse's Social Security benefits can significantly impact your retirement income. Your spouse could delay benefits to maximize their income while you claim yours early (or vice versa). It's important to plan with your spouse if you have one.
- Continuing to Work: Working part-time while claiming benefits is an easy way to compensate for the reduction. Earned income can sometimes affect your benefits, but this is eliminated once you reach full retirement age. Continued work can boost your overall income, potentially allowing you to save even more for retirement or your hobbies.
- Tax-Efficient Withdrawals: It's important to plan for withdrawals from your retirement account, such as IRSs or 401(k)s. Withdrawing too much too soon can push you into a higher tax bracket and erode your savings. Make sure you develop a tax-efficient withdrawal strategy to maximize your income.
These strategies can help you use your early Social Security check effectively. It's crucial to carefully assess your financial situation and what you want out of your retirement. Whether claiming at 65 works for you depends on your other income sources (including savings) and how much money you plan on spending.
Should You Claim Social Security at 65?
When you should claim depends on your goals and other income streams. If you already have plenty of money saved, having the extra Social Security income may not mean much!
Whether or not you should claim Social Security at 65 depends on your individual circumstances. Here are some advantages and disadvantages to consider:
Advantages of Claiming at 65:
- Immediate Financial Security: Provides a guaranteed income stream to bridge the gap until other retirement income kicks in.
- Increased Flexibility: Allows you to retire from full-time work sooner and pursue your passions.
- Reduced Stress: Knowing you have a steady income can help ease financial anxiety.
Disadvantages of Claiming at 65:
- Lower Lifetime Benefits: When you claim early, your monthly benefit will be permanently reduced compared to waiting until your full retirement age. This decrease is permanent, even after you reach full retirement age.
- Potential Tax Implications: Social Security benefits can become taxable depending on your overall income. It's important to balance your benefits with your other income streams.
Drawing Social Security at 65 isn't for everyone, but it can be a good decision for some.
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