The Pros and Cons of Taking Social Security at 62, 67 and 70

Deciding when to start your Social Security benefits is one of the most important choices you’ll ever make. It determines your monthly income for the rest of your life, affects your surviving spouse’s benefits, and changes your overall tax picture.

There is no correct age to file. The plan is designed to pay out roughly the same total amount over the average lifetime regardless of when you start. The calculations change based on your health, your savings and whether you plan to continue working.

Let’s look at the advantages and disadvantages of the three main search steps.

Premature search at age 62

Age 62 is usually the first opportunity you have to claim your retirement benefits. It’s a popular decision, often driven by fear, but it comes with a permanent cost.

• The good ones: You get your money as soon as possible. If you are in poor health or have a family history of short life expectancy, applying early ensures you receive benefits while you can use them. It can also provide you with an important lifeline if you lose your job and can’t find a new job, allowing you to pay off debts without draining your investment accounts.
• Disadvantages: You face a permanent reduction in your monthly paycheck. If your Full Retirement Age is 67, claiming 62 means taking a permanent 30% square off of your initial benefit.
• Benefits penalty: If you apply early and continue to work, you enter the income test. The government will temporarily withhold part of your benefits if your earnings at work exceed a certain annual limit. Although you eventually get this money in the form of bigger paychecks later in life, it defeats the purpose of looking early to increase your current income.

Awaiting full retirement age at 67

For anyone born in 1960 or later, age 67 is your Full Retirement Age. These are the years when the government deems you eligible to receive your standard, unreduced benefit amount.

• The good ones: You get 100% of your full profit amount. Reaching this age also eliminates the income test. You can work the way you want, earn a high salary, and still collect your full Social Security check every month without withholding penalties.
• Disadvantages: You must wait five years before your first date of eligibility. If you have a short life expectancy, you may be leaving money on the table compared to someone who filed at 62 and collected checks in those five gap years.

It is delayed to a maximum payment of 70

Every year you delay filing past your Full Retirement Age, the government rewards you with delayed retirement credits. These credits stop accumulating when you turn 70.

• The good ones: You increase your guaranteed monthly income. Every year you delay filing past your retirement age, you see an 8% increase in your initial benefit. This is a guaranteed 8% annual return – the hardest to find risk-free in the open market. In addition, if you are a high earner in marriage, delaying until 70 increases the survivor’s benefit if you pass away first.
• Disadvantages: It requires patience and other funds. You must fund your lifestyle from your savings or income during your 60s. You also need to live long enough to reach the break-even point: In general, you need to live into your late 80s for the total amount of your checks during your retirement to exceed the total amount you would have collected starting earlier.

Finding your personal sweet spot

Look at your health, your marriage and your bank accounts. If you have health problems or need money to survive, seeking 62 is a completely logical choice.

If you have longevity in your family and enough savings to cover the gap, waiting until 70 is smart. It provides a very high guaranteed income floor late in life, when you can’t go back to work.

Review your latest statements directly from the government, use your specific family numbers, and schedule time with your spouse.