Your full retirement age (FRA) is the key
To understand what is the best age to retire to get full benefits, you must first know your specific full retirement age (FRA). Your FRA is the age at which you are eligible to receive 100% of the Social Security benefits you've earned. The age is not universal; it's determined by your birth year, and has gradually increased over time. For anyone born in 1960 or later, the FRA is 67. If you were born between 1943 and 1954, your FRA is 66, with a gradual increase for those born in the years between.
The consequences of retiring early or delaying
Claiming benefits before your FRA comes with a permanent reduction in your monthly payment. You can start receiving Social Security as early as age 62, but your benefits will be significantly lower. For example, if your FRA is 67 and you start benefits at 62, your payment will be reduced by about 30%. This reduction is permanent and affects your monthly income for the rest of your life.
On the other hand, delaying your retirement beyond your FRA can significantly increase your monthly benefits. The Social Security Administration provides delayed retirement credits, which add 8% to your monthly benefit for each year you postpone claiming, up to age 70. This means that waiting until 70 could result in a monthly payout that is over 24% higher than your full benefit amount. This offers a powerful incentive for those who are able to continue working, especially if they have a higher life expectancy.
Factors to consider beyond full benefits
While receiving your full Social Security benefit is a primary goal, it's not the only factor in deciding when to retire. Personal health, financial readiness, and lifestyle goals all play a crucial role.
- Health: Your health status can be a major determinant. Poor health may necessitate an earlier retirement, but it's important to consider that early retirement benefits will be reduced. For those with demanding jobs or existing health conditions, retiring earlier might be the best option, even with reduced benefits. Conversely, good health might make working longer and boosting your retirement income more attractive.
- Healthcare costs: Medicare eligibility begins at age 65 for most people. If you retire before 65, you must have a plan for securing and paying for health insurance, which can be a significant expense. Options include COBRA, Affordable Care Act marketplace plans, or other private insurance, all of which should be factored into your budget.
- Financial stability: Your overall financial picture—including savings in 401(k)s, IRAs, and other investments—should be considered. An early retirement means your savings will need to last longer, while delaying retirement allows your investments more time to grow, taking advantage of compounding. Some people may choose to work part-time in retirement to supplement their income and maintain social engagement.
- Lifestyle goals: Your post-retirement plans—traveling, hobbies, or volunteering—should also influence your decision. A longer, more active retirement may require a larger nest egg, making delayed retirement more appealing.
Comparison of early, full, and delayed retirement
Choosing the best age to retire is a trade-off between receiving benefits sooner and receiving a larger monthly payment. The table below compares the implications of claiming Social Security benefits at age 62, at your full retirement age (FRA), and at age 70.
| Feature | Early Retirement (Age 62) | Full Retirement (Age 66-67) | Delayed Retirement (Age 70) |
|---|---|---|---|
| Monthly Benefit | Permanently reduced by up to 30% compared to FRA. | Receive 100% of your earned benefit. | Up to 24% higher than your FRA benefit, due to delayed retirement credits. |
| Lifetime Income | Can result in a lower total lifetime payout, especially if you live a long time. | Total lifetime benefits are intended to be actuarially equivalent to other claiming ages for someone with average life expectancy. | Can provide a higher total lifetime payout if you have a longer life expectancy. |
| Flexibility | Provides income sooner if needed for health issues or other circumstances. | Represents a balance between receiving benefits and maximizing them. | Offers the highest monthly benefit and serves as an insurance policy against outliving your savings. |
| Investment Growth | Forces earlier withdrawals, giving your investments less time to grow. | Your investments have more time to grow than with early retirement. | Maximizes time for your investments to grow through compounding. |
| Health Insurance | Need to cover the gap between retiring and Medicare eligibility at 65. | You can coordinate your retirement with Medicare enrollment. | You can use employer-sponsored health insurance longer before switching to Medicare. |
| Working | Earnings are subject to a yearly limit, which can temporarily reduce benefits. | No earnings limit, so you can work and receive full benefits without reduction. | No earnings limit, allows continued saving and investment. |
Creating your personal retirement strategy
The ideal age to retire to get full benefits depends on your unique financial situation and goals. While your FRA dictates when you can receive 100% of your earned Social Security, the optimal strategy might involve delaying further to maximize payments or claiming earlier to address health or personal needs. Before making your final decision, create a personal my Social Security account to get an accurate estimate of your potential benefits. Weighing all of these factors is crucial for making an informed choice that supports your desired lifestyle in retirement.
Conclusion
Ultimately, there is no single best age for everyone to retire and get full benefits; it's a decision based on your specific circumstances, particularly your birth year and its corresponding full retirement age (FRA). Claiming at your FRA, or even delaying until age 70, provides a larger monthly Social Security payment, which can be invaluable for financial security. For those with financial flexibility, delaying can serve as an effective hedge against outliving savings. However, for many, an earlier retirement is necessary or desired due to health, career, or personal factors, and the reduced benefits may be a worthwhile trade-off. By considering all the variables, including Social Security rules, personal finances, health coverage, and lifestyle, you can create a retirement plan that works best for you.
