The amount of Social Security income you’ll receive on a monthly basis depends not only on your income during your working years but also when you claim your benefits. The longer you wait, the more you’ll receive — up until age 70.
Your full retirement age or FRA (66 to 67, depending on your birth year) is when you can begin claiming your full Social Security benefits, but you can claim a fraction of your benefits as early as age 62. Just note, if you elect to begin claiming Social Security early, you’re locked into that reduced percentage of your full benefit.
Here’s how your monthly Social Security benefits are affected by the age you claim them:
- Age 62: You’ll receive a minimum of 70% of your FRA benefits.
- Age 66 to 67: You’ll receive your full benefits.
- Age 70: You’ll receive your maximum benefits, up to 132% of your FRA amount.
While in many cases it can make sense to delay claiming Social Security to maximize your cumulative benefit (the total amount of income you’ll receive over your lifetime from Social Security), it can also pay off to claim early.
There are plenty of situations where claiming your benefits at 62 makes practical sense, but there’s a less common scenario where claiming at 62 is virtually a no-brainer.
If you don’t need it, then invest it
If you don’t need your Social Security benefits to fund your lifestyle, because you have adequate income from other sources such as a pension, 401(k), Roth IRA, or rental properties, then you should consider claiming your benefits at 62 so you can put the money to work by investing in lower-risk assets such as broad-market index funds.
Though you’ll be collecting a smaller check each month by claiming early, you’ll also give your investments more time to compound.
Let’s use an example to illustrate this strategy. Assume at your FRA of 67, you qualify for a benefit of $2,500 per month. If you choose to claim at age 62, you’d give up 30% of your FRA benefit, leaving you with $1,750 per…
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