Photo illustration by Sarina Finkelstein and Lixia Guo; Getty Images (3)
By Elizabeth O'Brien
March 7, 2019

When it comes to claiming Social Security, the early bird gets a smaller worm. And many retirees fall into this category, claiming early and locking themselves into lower monthly benefits for life.

The most popular age for claiming Social Security is also the earliest age at which you’re eligible for (non-disability) benefits: 62. About 29% of men and 33% of women filed for Social Security benefits at that age in 2017, according to the Social Security Administration.

If you claim at 62, you’ll get roughly 75% of what you would have received had you waited several years for what the government calls your full retirement age, when you get 100% of what you’re eligible for. That’s not even your max: if you were born in 1960 or later and you’re able to hang on until 70 to claim, you’ll get a bonus–called “delayed retirement credits”— that pushes your monthly benefit to 124% of what you would have received at full retirement age. Those born from 1943 to 1954 get an even sweeter reward for waiting until 70, with a bonus of 132%. (Everyone born between 1955 and 1960 is eligible for delayed retirement credits of between 124% and 132%).

The difference is real and can add up to tens if not hundreds of thousands of dollars if you live to or exceed the average life expectancy: A 62-year-old never-married person with an average annual salary of $75,000 would receive $1,572 a month claiming at age 62, $2,168 a month claiming at full retirement age, and $2,776 monthly claiming at age 70, according to the AARP Social Security calculator. (Full retirement age is 66 for everyone born between 1943 and 1954, 67 for people born in 1960 or later, and age 66 and some months for those born between 1955 and 1959.) Yet in 2017, only about 4% of men and 6% of women waited until at least age 70 to claim, according to the Social Security Administration.

“The majority of folks know they get a penalty if they take it early, but they might not know about delayed retirement credits,” says Bill Van Sant, a certified financial planner. What’s more, many of his clients don’t know how Social Security benefits are taxed. Those who claim in their early 60s while they’re still working full-time are often surprised to find they’re paying taxes on 85% of their benefits since their income exceeds certain thresholds.

The prevailing motivation of those who file early is wanting to get what’s theirs, Van Sant says: “They want [their money] out of the government’s hands.”

This mentality is largely based on fears that the Social Security program will go bankrupt, and that benefits will dwindle to nothing. This isn’t the case. The Social Security trust fund is projected to be depleted in 2034. If Congress does nothing — a big “if,” since most experts believe that politicians will take action to shore up the program when push comes to shove — then benefits for beneficiaries will be reduced by about 25%. (Payroll taxes will continue to roll in to fund partial benefits even if the trust fund runs dry.)

A more likely scenario is that Congress will make changes to Social Security that will take effect very gradually, says Andrew Eschtruth, communications director for the Center for Retirement Research at Boston College. So any changes — to benefits or claiming ages or the wages subject to Social Security payroll taxes — will affect only members of Gen X and younger, or maybe even millennials and under, depending on when and how Congress acts.

Bottom line? In certain circumstances, such as if you’re in poor health or have little savings or ability to work, it can make sense to claim at 62. But at least be aware of the tradeoffs involved. Even if you can’t wait until 70, you can still benefit from waiting as long as possible to claim, since benefits inch up over time.

“Even small delays can often be beneficial for people,” Eschtruth says.

Clarification: This story has been updated to include the delayed retirement credits that people born between 1943 and 1959 are eligible to receive if they wait to claim Social Security until age 70.

 

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