As you prepare for retirement, one of the biggest questions you might be asking yourself is when you should start claiming your Social Security benefits. Retirees can choose to start claiming their benefits as early as age 62, but the longer you wait, the bigger the payout will be.
Learn more about what delaying your benefits entails, and whether it’s the right move for you.
Collecting Retirement Benefits: The Basics
Any retiree can start receiving benefits when they reach the age of 62. However, each year you delay collecting beyond your full retirement age (between 66 and 67 years old depending on your date of birth), you receive delayed retirement credits worth 8%. These increases occur until you’ve reached the age 70 maximum.
If you start claiming before you reach your full retirement age, you’ll receive permanently reduced benefits. The Social Security Administration provides a calculator for individuals to calculate exactly how much their benefit would decrease if they collect early.
COLA 2023: Another Way to Boost Your Benefits
The Social Security Cost of Living Adjustment will increase to a record 8.7% in 2023. This means the average retiree benefit of $1,628 will increase by about $142 for a total of $1,770.
Each year, the COLA amount is factored into the benefits you’d receive whether or not you start collecting at 62. This number then compounds, so if you hold off on claiming until you’ve reached full retirement age (or longer), you’ll receive a larger monthly benefit.
Suppose, for example, a 63-year-old retiree is eligible for a monthly benefit of $2,000 at full retirement age. If they didn’t collect last year, their benefits would have increased to $2,118 because the COLA was 5.9%. If they don’t collect this year, their benefits go up to $2,302. The COLAs keep getting added until you reach the age of 70.
Should You Wait to Claim? Consider These Factors.
YOUR NEEDS
If you have other resources and sources of income, such as an investment portfolio, you have more freedom when it comes to collecting your Social Security benefits. If, on the other hand, you need your benefits to help make ends meet, you may consider delaying
your benefits to maximize the monthly amount you receive.
YOUR LIFE EXPECTANCY
The sooner you start collecting your benefits, the smaller your monthly checks will be. However, you’ll receive them over a longer period of time. If you believe your life expectancy may be shorter than average, you might collect early to take advantage of your benefits while you can. If you think you’ll live past the average life expectancy, it might be worth it to wait for a larger monthly sum.
YOUR EMPLOYMENT STATUS
You can receive Social Security benefits and work at the same time. However, if you’re below your full retirement age and make more than certain amounts, your benefits will decrease. However, these reductions are only temporary and will no longer be reduced when you hit full retirement age.
Want to learn more about how delaying your benefits fits in with your larger financial plan? Connect with us today and experience our personalized approach to financial planning and wealth management.
