Understanding the difference in Social Security benefits
For most people today, the full retirement age (FRA) for receiving 100% of your Social Security benefits is 67. This was gradually increased from 65 over several decades. Claiming your benefits early at 65 means you will receive a permanently reduced monthly payment. This reduction can be significant, cutting your monthly benefit by approximately 13.3% for those whose FRA is 67. In contrast, waiting until 67 ensures you receive your full, unreduced benefit, which can provide greater financial stability over the long term, especially if you have a longer life expectancy.
The financial trade-offs: 65 vs. 67
The core financial consideration is balancing a smaller, earlier income stream against a larger, later one. Retiring at 65 gives you an immediate income, but your total lifetime payout could be lower if you live into your 80s or beyond, even when factoring in the extra two years of benefits. For example, a hypothetical individual with a full benefit of $1,800 a month at age 67 might receive a reduced payment of around $1,564 by claiming at 65. Over many years, that monthly difference adds up. If you are financially stable enough to defer your benefits, waiting until 67 or even 70 could substantially increase your total lifetime Social Security income.
Comparing retirement timing: The key factors
Here's a comparison to help you weigh your options:
| Factor | Retiring at 65 | Retiring at 67 |
|---|---|---|
| Social Security Benefit | Reduced by approx. 13.3% permanently | 100% of your earned benefit |
| Lifetime Income | Potentially lower cumulative total, especially for those with longer life expectancies | Higher cumulative total over a long retirement period |
| Earnings Limits | Subject to annual earnings limits if you work, with benefits withheld if you earn above a certain threshold | No earnings limits; you can work and receive your full benefit simultaneously |
| Medicare Eligibility | Eligible for Medicare, but it's important to apply three months before your 65th birthday | Eligible for Medicare at 65; your retirement age doesn't change your eligibility start date |
| Savings Longevity | Puts a heavier strain on your personal savings and investments during the two years before you reach FRA | Provides two more years to continue saving and allow investments to grow |
| Health and Quality of Life | Allows earlier access to leisure, travel, or other retirement hobbies while potentially healthier | Offers a larger monthly income, potentially funding a higher quality of life later in retirement |
The crucial role of health and life expectancy
Your health is a paramount consideration. If you have chronic health issues or a shorter life expectancy based on family history, claiming benefits at 65 might make sense. The goal is to maximize your total lifetime benefits, and for some, receiving benefits for more years, even at a reduced rate, is the optimal strategy. Conversely, if you are in excellent health and anticipate living well into your 80s or 90s, delaying until 67 (or even 70, for maximum delayed credits) can be a powerful wealth-building strategy. Your higher monthly benefit will be protected from inflation via cost-of-living adjustments (COLAs), securing a higher base income for the rest of your life.
Considering other financial and personal factors
Beyond Social Security, your overall financial picture includes retirement savings like 401(k)s and IRAs. Retiring at 65 requires you to draw down these savings for two additional years, whereas waiting until 67 gives your investments more time to grow. Additionally, if you plan to continue working part-time, delaying until 67 is more beneficial, as you won't face the Social Security earnings limit that applies to those claiming benefits before their FRA. Personal considerations, such as a desire to pursue new hobbies, travel while you are younger, or spend more time with family, also play a significant role. For some, the freedom of retiring at 65 outweighs the financial benefit of waiting.
Making the decision: A personalized approach
There is no one-size-fits-all answer to whether it is better to retire at 65 than 67. The right choice depends on your specific financial situation, health, and personal goals. It is highly recommended to consult with a financial advisor to create a personalized retirement plan that considers all these factors. The Social Security Administration's website is also a valuable resource for calculating your estimated benefits at different claiming ages, which can inform your decision. By taking a holistic view of your finances and lifestyle, you can confidently choose the retirement age that best suits your needs for a secure and healthy future.
Taking charge of your retirement
Ultimately, the choice between retiring at 65 versus 67 is about aligning your financial strategy with your life goals. While a later retirement may offer a greater monthly income, the two-year difference can be a valuable period for personal enrichment and reduced stress. Thoroughly evaluate your health, finances, and long-term aspirations to make the most informed decision for your healthy aging journey. For more guidance on managing finances during your golden years, consider exploring resources at the National Council on Aging.
