What to Know About Social Security Best Age for Collecting It. Deciding when to start collecting Social Security benefits is a crucial aspect of retirement planning. The choice between taking benefits at age 62 or waiting until the full retirement age of 67 is a decision that varies for each individual. Let’s explore the reasons for both early and delayed Social Security collection to help you make an informed choice.
Reasons to Collect Social Security Early (Age 62)
Financial Necessity
Many individuals opt to start receiving Social Security benefits early due to financial needs. The reality is that not everyone has the luxury of waiting until full retirement age. The 2023 Retirement Confidence Survey indicates that a significant number of Americans haven’t saved enough for retirement, making early benefits crucial for financial survival.
Uncertain Health and Longevity
Another compelling reason to start early is uncertainty about your health and life expectancy. If you’re not in the best health or have family members with shorter-than-average life spans, beginning Social Security earlier may provide a better financial strategy.
Market Volatility
Economic factors also play a role. If the stock market experiences a downturn near your retirement, you may not want to sell shares at a low point. Starting Social Security early allows you to rely less on your investment portfolio until market conditions improve.
Health Insurance Coverage
Initiating Social Security benefits early can help cover health insurance costs until you reach the age of 65 when Medicare enrollment becomes available.
Opportunity for Investment
Savvy investors with sufficient savings may choose to start Social Security early to invest the additional income, expecting returns greater than the 8% annual growth offered by delayed benefits.
Reasons to Delay Social Security (Beyond Age 67)
Increased Benefits
Waiting until after the full retirement age (66 or 67 for most individuals) results in increased Social Security benefits. For every year of delay up to age 70, benefits grow by about 8%. This can significantly enhance your overall financial picture in retirement.
Cost-of-Living Adjustments (COLAs)
Delaying benefits not only increases the base amount but also leads to larger cost-of-living adjustments in most years. This can be particularly beneficial for maintaining your purchasing power throughout retirement.
Long-Term Financial Health
If there’s a good chance you’ll live past the age of 80, delaying benefits might be a strategic move. This allows you to reach a break-even point, where the total amount collected equals out, whether through numerous smaller checks or fewer larger ones.
Conclusion
Understanding the nuances of Social Security is crucial for effective retirement planning. Whether you decide to start collecting benefits at 62, wait until 70, or find a middle ground, Social Security plays a pivotal role in your retirement income. The more informed you are about the options available, the better you can tailor your strategy to your unique circumstances.
