What is the Best Age to Begin Collecting Social Security Benefits?

June 15, 2020

Social Security is the main source of retirement income for tens of millions of Americans. Individuals can start collecting Social Security benefits at the age of 62, or potentially even earlier if you are a survivor of another Social security claimant or are on disability. Full retirement age is between ages 66 and 67 and is dependent upon the year you were born and everyone is required to take it at age 70. The decision on when to take Social Security is dependent upon individual circumstances and could have a direct impact on your quality of life in your golden years.

If you choose to take your benefits prior to your full retirement age your benefits will be reduced. For example, according to Social Security Online Services, an individual is scheduled to receive a monthly benefit of $2,162, or $25,932 a year, if she waits until his full retirement age; however, if she begins collecting his benefits at age 62 she will receive $1,522 a month, or $18,264 a year, for the remainder of her life. This represents a difference of $640 per month or $7,680 a year for as long as she lives. At first glance, it may appear that this client should wait the additional five years before collecting Social Security benefits. The decision is not that easy though so let's examine the client's case in more detail and figure out the break-even age for this individual.

This client is healthy and expects to live, according to the Social Security Life Expectancy Calculator, an additional 21.4 years past her 62 birthday. If the client collects Social Security beginning at age 62, she will collect $18,264 a year so between the ages of 62 and 67 she will have collected a total of $91,320. If this client waits until she is 67 it will take her 11.9 years until she makes up for not collecting social security from age 62 to 67. This will make her almost 79 years-old before she breaks even.

Life is much more complex than the simple math illustrated above. What happens she is married? What if she is in poor health? Is she planning to continue to work? If so, this can reduce her social security benefits. This example also does not take into account the specific current and future cash needs and investments, tax situation, inflation, as well as a myriad of other variables.

It is important to understand your unique situation and the pros and cons of each decision before deciding to collect social security. Seek help from your financial advisor if necessary because the decision you make about when to take social security will impact the rest of your life and potentially the rest of your spouse's life as well.