Retirement Planning: Making the Right Decision with Social Security

The impact of social security benefits on retirement can be significant, especially regarding the timing of when benefits are claimed. The amount of monthly payments changes substantially depending on the chosen age, often by several hundred dollars per month. Three of the most popular ages for applying are 62, 67, and 70 years. At age 62, one can first make a claim, 67 years is considered the normal retirement age for everyone born from 1960 onward, and 70 years is the maximum age to benefit from the highest monthly payments. There is no blanket solution, as individual life situations are crucial. However, three simple questions can help determine the best age for filing a claim. First, one should consider their financial situation. On average, retirees collect $739 more per month at age 70 than at age 62, and about $154 more than when retiring at age 67, based on 2023 Social Security Administration data. Those with few savings and who rely on social security should delay benefits until age 70. Even a delay of a few years can increase the monthly payments by several hundred dollars. Conversely, those with sufficient savings and who are not heavily dependent on social security may consider retiring earlier. In such cases, early filing can facilitate an easier and earlier start to retirement. Life expectancy is another important factor. One should realistically assess themselves: Those who anticipate a longer-than-average lifespan could benefit from larger checks by delaying the application. Longer life years mean a higher risk of depleting savings, while higher monthly payments can ensure a more comfortable retirement. If there is an expectation that one's life span will not extend into the 80s due to health issues, it may make more sense to draw benefits early. Despite lower monthly payments, the total amount could be higher due to the longer duration of benefit collection. For those with an average life expectancy and moderate savings, personal priorities are crucial. Those who wish to retire early might fare better by applying at age 62, even though financial sacrifices may be necessary. However, if the goal is to maximize income in retirement due to plans for higher spending, waiting until age 70 might be more sensible. It offers the possibility of enjoying a more comfortable retirement, even if it means waiting a few years. For the indecisive, age 67 could be a good compromise. It allows for an earlier retirement than at 70 and still offers higher monthly payments than at 62. There are many considerations for filing a social security claim—an incredibly important decision. By weighing one's situation and priorities, it becomes easier to choose the optimal age for a successful retirement.