The Billion-Dollar Question: When Should You Claim Social Security?
Deciding when to start receiving Social Security benefits is one of the most significant financial choices you'll make for your retirement. It can influence your income for the rest of your life. While you can begin taking benefits as early as age 62, many people consider age 65 a traditional retirement milestone. However, delaying until age 70 can dramatically increase your monthly payments. This guide explores the critical question: what is the difference between taking Social Security at 65 and 70?
Understanding Full Retirement Age (FRA)
Before diving into the specifics of claiming at 65 versus 70, it's essential to understand the concept of Full Retirement Age (FRA). Your FRA is the age at which you are entitled to 100% of your primary insurance amount (PIA), which is the benefit calculated from your lifetime earnings history. Your FRA is determined by your birth year:
- Born 1943-1954: FRA is 66
- Born 1955: FRA is 66 and 2 months
- Born 1956: FRA is 66 and 4 months
- Born 1957: FRA is 66 and 6 months
- Born 1958: FRA is 66 and 8 months
- Born 1959: FRA is 66 and 10 months
- Born 1960 and later: FRA is 67
Claiming benefits before your FRA results in a reduction, while claiming after results in an increase.
Claiming Social Security at Age 65: The Early Option
For anyone born in 1960 or later, the FRA is 67. If you decide to claim benefits at age 65, you are starting two years (24 months) before your FRA. This has a significant and permanent impact on your monthly benefit.
The Financial Impact
When you claim before your FRA, your benefits are reduced by a specific percentage for each month you start early. The reduction is 5/9 of 1% for each of the first 36 months, and 5/12 of 1% for each additional month.
For someone with an FRA of 67, claiming at 65 means their benefits will be permanently reduced by 13.33%. For example, if your full retirement benefit (PIA) at age 67 was calculated to be $2,000 per month, claiming at 65 would reduce your monthly payment to approximately $1,733.
Pros of Claiming at 65:
- Immediate Income: You receive income sooner, which can be essential if you need the funds for living expenses or have stopped working.
- Longer Duration of Payments: You will receive benefit payments for five more years than someone who waits until 70.
- Flexibility: It may allow you to retire earlier than you otherwise could.
Waiting to Claim at Age 70: The Maximum Benefit Strategy
Delaying your Social Security benefits beyond your FRA allows you to earn delayed retirement credits. These credits increase your monthly benefit for every month you wait, up until age 70. You do not receive any additional benefit for delaying past age 70.
The Financial Impact
The delayed retirement credit rate is 2/3 of 1% per month, which adds up to 8% per year. If your FRA is 67 and you wait until age 70, you delay for 36 months. This results in a permanent increase to your benefit of 24% over your full retirement amount.
Using the same example, if your PIA at age 67 was $2,000, waiting until age 70 would increase your monthly benefit to $2,480. That's $747 more per month than if you had claimed at 65 ($2,480 vs. $1,733).
Pros of Claiming at 70:
- Maximizes Monthly Income: You receive the highest possible monthly payment, providing greater financial security in your later years.
- Inflation Protection: Cost-of-Living Adjustments (COLAs) are based on your benefit amount. A higher starting benefit means you get a larger dollar increase from COLAs.
- Higher Survivor Benefits: If you are the higher earner, waiting to claim can provide a larger survivor benefit for your spouse.
Side-by-Side Comparison: Social Security at 65 vs. 70
To make the decision clearer, let's compare the two choices directly, assuming an FRA of 67 and a PIA of $2,000.
| Feature | Claiming at Age 65 | Claiming at Age 70 |
|---|---|---|
| Monthly Benefit | ~$1,733 (Reduced by 13.33%) | $2,480 (Increased by 24%) |
| Annual Benefit | ~$20,796 | $29,760 |
| Benefit vs. FRA | 86.7% of full benefit | 124% of full benefit |
| Breakeven Age | N/A | Typically late 70s to early 80s. Before this age, the total lifetime benefits from claiming at 65 are higher. |
| Survivor Benefit | Lower potential benefit for a surviving spouse. | Higher potential benefit for a surviving spouse. |
| Best For... | Individuals with shorter life expectancy, immediate financial need, or who want to retire early. | Individuals in good health with longer life expectancy, other sources of income, and who want to maximize their guaranteed lifetime income. |
Key Factors to Guide Your Decision
There's no single right answer; the best choice depends entirely on your personal circumstances. Consider these factors:
1. Your Health and Life Expectancy
This is the most critical, albeit difficult, factor. If you are in excellent health and have a family history of longevity, waiting until 70 is often the better financial bet. Conversely, if you have health issues or a shorter life expectancy, claiming earlier ensures you receive benefits.
2. Your Financial Needs
Do you need the money now? If you don't have other sources of income like a 401(k), pension, or savings to bridge the gap between retirement and age 70, claiming earlier might be a necessity, not a choice.
3. Spousal and Survivor Considerations
If you are married, your decision can affect your spouse's benefits. A surviving spouse is generally entitled to receive the higher of their own benefit or their deceased spouse's benefit. Delaying your claim to age 70 ensures the highest possible payment for your surviving partner.
4. Will You Continue Working?
If you claim benefits before your FRA and continue to work, your benefits may be temporarily reduced if your earnings exceed a certain annual limit. This is known as the Retirement Earnings Test. The limit changes annually. Once you reach FRA, this earnings test no longer applies.
Conclusion: Crafting Your Personal Strategy
The difference between taking Social Security at 65 and 70 is a classic trade-off: more payments of a smaller amount versus fewer years of much larger payments. Waiting until age 70 results in a monthly check that is roughly 43% larger than the one you would get at 65. The breakeven point—the age at which the total lifetime benefits from waiting catch up to the total from claiming early—is usually around age 80. If you live beyond that, delaying was the clear winner. Your decision should be made after a careful review of your health, finances, family needs, and retirement goals. For personalized estimates, you can use the tools provided by the Social Security Administration.
