There are some situations in which it makes sense to start receiving Social Security payments early, even though financial advisors frequently counsel their clients to wait as long as possible to do so—until they reach full retirement age, if not later.
As early as age 62, people can apply for Social Security and get a monthly stipend that is permanently lowered. According to the Social Security Administration, if you wait until you are 70 years old to file, you would only receive 132% of your entire retirement benefit amount. For people born after 1960, the full retirement age, when you would receive 100% of your benefit, is 67. Just 4% of recipients wait until they are 70 years old.
“I don’t want to minimize the fact that many people might be left without an option.” Schwab Center for Financial Research’s Rob Williams
According to the SSA, 29% of claimants chose to collect Social Security payments as of 2022, making age 62 the most popular age to do so. However, according to the SSA, the number of people filing early claims has decreased over the past few decades, from 60% in 1998.
“We advise you to wait until you reach full retirement age if you are in excellent health and have money from investments or employment. However, that is not the case for a lot of people,” stated Rob Williams, the Schwab Center for Financial Research’s managing director of financial planning. “I don’t want to downplay that many people may not have a choice.”
If you can’t work and can’t survive without your Social Security payment, think about filing early. As of December 2024, the Social Security Administration reported that the average monthly payout was $1,925.
“The hardest thing for folks to do is figure out how much they spend and whether they can cut back or make changes. “They may not always be able to, and they may have to take large withdrawals from their investments and savings,” stated Kyle Kraus, senior wealth planner at Alphacore Wealth Advisory. “Between the ages of 62 and 67, if we’re seeing withdrawal rates of 6, 7 and 8% – that puts them in danger territory of exhausting their money, and they may need to claim early to meet expenses.”
(The much-discussed 4% rule states that in order to avoid depleting their finances during their lifetime, a retiree should be permitted to withdraw 4% of their savings and investments in their first year of retirement. The dollar amount should thereafter be adjusted annually based on their updated balance.)
If your health is poor or you don’t think you’ll live a long life because of your family history, that’s another reason to claim your pension early. According to the SSA, the average life expectancy for a 65-year-old is currently 87 years for women and 84 years for men.
“When choosing when to start receiving Social Security, people should take into account both personal and family health concerns. According to Eric Steffy, a federal benefits specialist and the founder and CEO of Federal Solutions Support, people could have to file an early claim in order to help cover medical costs or to give the income they would not be receiving due to their inability to work. “It’s a very personal decision.”
Additionally, if you are the lower-earning spouse and your higher-earning spouse can wait to start receiving a bigger benefit, think about filing early. The spouse with the lower earnings history is then eligible to get their own Social Security payment. According to Williams, the first spouse can then transform their personal benefit into a spousal benefit when the higher-earning spouse makes a subsequent claim.
Not a precise science
You will receive a lower monthly benefit for a longer period of time if you start taking Social Security early. Your monthly income will increase over a shorter time period if you wait until you reach full retirement age, or at any point beyond that up to age 70.
In general, the difference between bigger for less and smaller for longer balances out around a break-even point in your early 80s. According to financial advisors who spoke to MarketWatch, your break-even age is also influenced by your tax status and how inflation may impact the purchasing power of your benefits.
“When will you be more active and likely to enjoy that money at age 65 or 70?” Federal Solutions Support’s Eric Steffy
“If you knew the day you were going to die, you could make the best choice. That’s why the break-even data is the magic question. If it isn’t possible, use the industry average, your family’s history, and your desired lifestyle. Is it necessary for bill payment? In retirement, do you want it to stoke a passion? “Steffy said.”
“I advise everyone to examine their family’s spending plan. You might need that money to travel, engage in hobbies, and design the kind of retirement lifestyle you choose,” Steffy added. “At age 65 or 70 – when will you be more active and be likely to enjoy that money?”
According to Steffy, many people have no idea how much they would be paid at different ages. He advises everyone to schedule a time to speak with someone by calling SSA or visiting SSA.gov.
You may find out how much money you will receive at different ages and how much your Social Security payments will be by using the calculators on SSA.gov. The 35 highest-earning years of your career are the basis for your benefits. To explore how delaying your retirement benefits will result in larger checks, use the Early or Late Retirement calculator.
Additionally, Social Security is approaching a deadline that may cause beneficiaries to lose faith in the program. Unless Congress takes action before 2035, when the trust funds supporting Social Security become bankrupt, payouts will be reduced by 17%. More uncertainties and ambiguity have been raised by that deadline and recent changes at the Social Security Administration itself, Williams said.
In many facets of politics and the economy, anxiety has increased. Communication from Washington has created uncertainty. It’s getting harder to predict what might occur,” Williams stated. It’s a sensitive subject. Concern over things that seem unknown is a common response.
It’s critical to take a moment to reflect, create a plan, and base decisions on it. We advise against filing too soon out of fear,” Williams stated.
Kraus concurred that customers are responding more emotionally to Social Security-related news.
“It’s on the minds of everyone coming up to that age,” Kraus stated.
