Understanding Full Retirement Age vs. Delayed Benefits
For anyone born in 1960 or later, your full retirement age (FRA) is 67, which is when you are entitled to 100% of your primary insurance amount (PIA). Delaying benefits past your FRA, however, can provide a significant and guaranteed return on your future payments, while claiming at 67 provides earlier access to your full benefit.
The Case for Taking Social Security at 67
For many retirees, claiming benefits at their full retirement age of 67 is a practical and balanced approach. It offers a middle ground between claiming early with a permanent reduction and waiting until age 70. There are several compelling reasons to consider this option:
- Access to 100% of Your PIA: By waiting until 67, you receive the full monthly benefit you have earned based on your lifetime earnings, with no reduction applied.
- Consistent Income Stream Sooner: Starting benefits at 67 provides a reliable income stream three years earlier than the maximum delayed claiming age. This can be crucial if you have a shorter than average life expectancy or if you need the money to cover living expenses.
- Health and Longevity Uncertainty: While delaying increases your monthly check, it comes with a gamble. You are betting that you will live long enough past the break-even point—the age at which the total benefits received from waiting until 70 surpass those from claiming at 67—to make the wait worthwhile. If you have health issues or a family history of shorter lifespans, claiming at 67 can be the more prudent choice.
- Flexibility for Financial Planning: Starting benefits at 67 can allow you to preserve your other retirement savings, like your 401(k) or IRA, for a longer period. This provides flexibility and keeps more of your assets in a position to grow, especially if your portfolio has recently experienced a downturn.
The Case for Delaying Until 70
Waiting until age 70 is often cited as the best strategy for maximizing your total lifetime Social Security benefits. This is primarily due to delayed retirement credits (DRCs).
- 8% Annual Increase (Delayed Retirement Credits): For each year you delay claiming past your FRA (age 67), your monthly benefit increases by 8%, maxing out at age 70. For someone with an FRA of 67, this translates to a 24% increase in their monthly payout if they wait until 70.
- Highest Possible Monthly Benefit: Delaying until 70 provides the highest possible monthly payment for the rest of your life. This larger, inflation-adjusted check is a powerful safeguard against longevity risk—the risk of outliving your savings—and can provide immense financial security in your later years.
- Maximizing Survivor Benefits: For married couples, delaying the higher earner's benefit until 70 can be an excellent strategy. The higher monthly amount serves as the basis for the survivor benefit that the lower-earning spouse will receive after the higher earner passes away.
- Tax Planning Opportunities: Not taking Social Security income in your late 60s could allow for more strategic tax planning, such as performing Roth conversions at potentially lower tax brackets before your benefits begin.
A Comparison of Claiming at 67 vs. 70
| Factor | Claiming at 67 (FRA) | Claiming at 70 (Maximum Delay) |
|---|---|---|
| Monthly Benefit | 100% of your PIA | Up to 124% of your PIA (for those with FRA of 67) |
| Lifetime Income | Lower potential total if you live well past your break-even point. | Higher potential total if you live past your break-even point, typically 80-82. |
| Access to Funds | You receive a consistent income stream three years earlier. | Requires tapping into other savings for three additional years. |
| Longevity Risk | Offers less protection against outliving your savings due to smaller monthly checks. | Offers robust protection against longevity risk with the highest possible lifetime monthly payout. |
| Spousal/Survivor Impact | Base for survivor benefit is lower than if you wait until 70. | The highest possible survivor benefit is locked in for your spouse. |
Key Factors to Consider When Making Your Choice
Your personal circumstances should be the primary driver of this decision. Consider these questions carefully:
- Your Life Expectancy: Do you have significant health concerns? Does your family history suggest a shorter lifespan? If you don't expect to live far past your break-even point (around age 80-82), claiming earlier might yield more total dollars.
- Your Financial Needs: Do you need the income now to meet your living expenses? Do you have other reliable income sources, like a pension or substantial savings, that can support you while your Social Security grows?
- Your Spousal and Survivor Needs: If you are married, especially if you are the higher earner, waiting until 70 can secure the largest possible survivor benefit for your spouse after you pass away. This is a critical factor for financial security in retirement.
- Your Employment Status: If you continue to work after your FRA, your earnings will not reduce your Social Security benefits, giving you an advantage. However, if you are not working and need the income, this is less of a factor.
Using Your Social Security Statement
Before making any final decision, it is essential to obtain and review your official Social Security statement. This document provides an estimate of your PIA and projected benefits at different ages. To get this accurate information for your specific situation, you should visit the Social Security Administration's official website.
Visit the Social Security Administration's website to view your statement
Conclusion
There is no one-size-fits-all answer to the question of when to claim Social Security. The decision of should I take Social Security at 67 or 70? requires a careful balance of financial need, longevity expectations, and family considerations. While waiting until 70 offers the highest possible monthly payment, claiming at 67 might be the better choice for those prioritizing earlier income or who have health concerns. Consulting with a financial advisor can help you weigh these factors and make the best decision for your unique retirement plan. It is a decision that impacts your financial security for the rest of your life, so taking the time to make an informed choice is a crucial step towards a healthy aging and senior care plan.
