Claiming Benefits Early and Late

How much of a haircut will you take if you claim Social Security early? To find out, you need to know your full Social Security retirement age—a crucial piece of information, especially if you’re married and trying to figure out the best strategy for claiming benefits.

If you were born between 1943 and 1954 and hence your full Social Security retirement age is 66, your benefit will be reduced by 25% if you claim benefits at age 62, 20% if you claim at 63, 13.3% at 64 and 6.7% at 65.

If you were born in 1960 or later and hence your full Social Security retirement age is 67, your benefit will be reduced by 30% if you claim benefits at 62, 25% if you claim at 63, 20% at 64 and so on. For those born between 1955 and 1959, the reduction will fall somewhere between these two numbers.

What if you claim benefits after your full retirement age? Your benefit will increase by 8 percentage points for every year you wait. These are known as delayed retirement credits. For instance, if your full retirement age is 66, at which point you would be eligible for $1,000 a month, you could receive $750 if you claim at 62 or $1,320 if you claim at 70—a difference of 76%. Similarly, if your full retirement age is 67 and you’ll be eligible for $1,000 at that point, you could receive $700 at 62 or $1,240 at 70—a difference of 77%. These figures don’t reflect any increases because of inflation.

If you live to an average life expectancy, you should—roughly speaking—find that you fare equally well no matter when you claim benefits. This “actuarial equivalence,” however, doesn’t take into account three valuable benefits that tilt the argument in favor of delaying: spousal benefits, survivor benefits and the financial safety net that Social Security provides in case you live longer than expected.

What if you claimed Social Security and then realize you took benefits too early? You have two options. First, once you reach your full retirement age, you can suspend your benefit and earn delayed retirement credits. Under new rules that kicked in after April 2016, if you suspend your own benefit, you will also suspend any spousal or family benefits that are being paid based on your earnings record.

Second, you could withdraw your application for benefits. This is a onetime option that’s available within 12 months of starting benefits. It can be used before or after your full retirement age. But there’s a sizable price to be paid: You have to repay the benefits already received, including benefits collected by family members based on your earnings record.

Next: Breaking Even on Social Security

Previous: Social Security Eligibility

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