The advantages of Social Security are numerous, but one that people don’t often realize is its flexibility.
By changing the age at which you start claiming retirement benefits, you can greatly alter the amount you receive each month.
Age 62 is the earliest you can claim, but the longer you wait the fatter the checks will be.
If you wait until you reach full retirement age (between 65 and 67), you should receive 100% of the amount that you’re entitled to.
However, if you start claiming before you reach full retirement age, then your benefits will be reduced.
On the other hand, if you’re willing to wait a little longer, for each month that you delay taking benefits before reaching full retirement age you will receive a bonus to make up for forgone benefits.
According to the Center for Retirement Research, in 2013 42% of men and 48% of women filed for retirement benefits at age 62, the earliest possible age.
Despite the benefits of waiting, few wait until reaching full retirement age before filing for Social Security: A mere 4% of women and 2% of men.
The extra benefit can mean you receive up to 24% extra in addition to your base amount, but a whopping 96% to 98% of Americans fail to take full advantage of this.
It goes without saying therefore that to get the biggest possible check, you should delay gratification and wait until you reach full retirement age before claiming.
Those who continue to work until reaching full retirement age also avoid dipping in to their retirement fund before they need to.
This will increase the size of their nest egg and mean they enjoy even greater income on retirement.
An extra $541,000
For example, imagine a 62-year-old with $300,000 saved for retirement that contributes $200 per month to their retirement fund.
If that person continued to save at that same rate and earned a 7% annual return on their savings, he or she would have around $541,000 saved once they reached age 70.
When these additional savings are combined with the extra Social Security benefits they would receive by waiting until full retirement age their financial position going into retirement will be very promising indeed.
Every situation is different. It is impossible to make a broad statement as to when the best time is to claim Social Security benefits. This will differ from individual to individual.
Nevertheless, if you can keep working, later is better for sure.