How the Age at Which You Take Social Security Will Affect Your Benefits

There's a general understanding that the longer you wait to receive Social Security benefits, the more your benefits will be. With that idea in mind, there's an important caveat for retirees to consider. The longer you wait to receive benefits, the shorter a time frame you may have to collect. This, of course, is dependent on how long you live after beginning to receive benefits. There's a bit of a tradeoff when deciding whether or not to delay benefits, meaning you should decide based on your unique financial situation and strategy for retirement.

Receiving Benefits Early

Some argue a retiree should take his or her benefits as early as possible. Cash in hand is always better than a promise. This means that while Social Security benefits can begin being withdrawn at age 62, the amount you'll receive each month would be lower than if you chose to begin receiving payments at a later date. With that in mind, some may choose to follow an investment strategy that utilizes these funds in anticipation of growing them elsewhere.

Delaying Benefits

On the other hand, if a person waits to receive benefits, they will receive an additional percentage (a bonus) to their benefits. This bonus percentage caps out at age 70, meaning you will receive the maximum amount of Social Security benefits if you delay payments until age 70. As an example, for those born after 1960, the difference between taking benefits at age 62 versus 67 is about 30 percent, or $300 out of every $1,000 possible.¹

Considerations

As you start preparing for retirement, you'll want to keep a few things in mind regarding your Social Security benefits. You'll want to consider when you will be eligible to begin receiving benefits and how you will fill the financial gap between retirement and when you begin collecting benefits. Prior to recording 35 years of work per Social Security, a person won’t realize a full benefit payment schedule.² The figure may actually be even lower if any of the years were not full-time employment. 

There's also the caveat of earning money in later years. The traditional thinking has been that a person who worked for about 30 years and then retired, by the time he or she took their government benefits, the earnings would no longer be coming in and the person would receive benefits in a lower tax bracket. However, these days, working retirement is becoming far more common. And that means the income plus benefits plus any retirement account withdrawals starts to bump people up into more and more taxable brackets. So in some cases it starts to make sense to rely on earnings or savings first and hold of on withdrawing benefits to avoid unnecessary tax hits. On the other hand, others argue it's better to tax the government benefits early and then rely on personal savings later.

As you're going through the retirement planning process what you will find is that there is no clear default path to rely on. Each retiree has to map out his or her personal situation and make the best choice that applies at the time. However, those who research, educate themselves, and time their decisions right can often gain more than their peers who otherwise are the same in income, timing and age.