There’s no “right” age to begin receiving Social Security retirement benefits. It’s a personal decision based on multiple factors, including how long someone wants to work and how much retirement income is needed. Workers are entitled to full benefits at their full retirement age (FRA) — 66 to 67, depending on year of birth. Claiming before FRA (as early as age 62) will result in a permanently reduced benefit, while claiming later will result in a permanently increased benefit due to delayed retirement credits, which can be earned up to age 70.

Ss Chart

Source: Social Security Administration, 2023 (based on 2022 data)

Understanding Social Security Math

For the most part, individuals become eligible for Social Security benefits based on their work history and payroll tax contributions to the system.  The Social Security Administration determines eligibility based on an individual’s work history and payroll tax contributions.  There are three types of benefits available including retirement, disabled and survivor benefits.  For the sake of discussion, we will be focusing on the retirement benefits.

When calculating your retirement benefits, the SSA bases this on an individual’s average indexed monthly earning (AIME) over the highest-earning 35 years of your career.  And then the SSA applies this formula to determine the proper insurance amount (PIA), which represents the monthly benefit amount payable at full retirement age (FRA).  Keep in mind that early retirement, before FRA, will result in reduced benefits, conversely delaying retirement can lead to increased benefits.

While early retirement offers access to freedoms and flexibility sooner, its essential to weigh the overall financial implications and consider your long-term financial security before making this firm decision.

Coordinating Benefits for Married Couples

If you are married, you have some options to maximize your combined benefits.  Some of the factors to consider include your age difference, differences in earnings history and whether one of you plans to continue working while the other claims benefits.  This is where the help of a financial advisor can really help you make a well-informed decision about when to start receiving your Social Security retirement benefits.

Not all couples experience good physical health when coming up to retirement ages.  For those who have health concerns that impact life expectancy, claiming early retirement may make sense.  The same is true for those who enjoy good health, claiming a later retirement could make sense for those couples.  Being truthful about your life expectancy is not a fun topic, but is certainly a safe topic to address with your financial advisor whose job is to help you enjoy your lifestyle for your lifetime.

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Sources: Broadridge Investment Management Solutions

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