Fewer Americans Are Claiming Social Security as Early as Possible — and That’s a Good Thing — The Motley Fool

One of an important retirement selections you will make is when to file for Social Security. Unlike Medicare, for which eligibility begins at age 65, you get an eight-year window to enroll in Social Security that begins at age 62 and ends at age 70. (Technically, you’ll be able to delay your advantages previous 70, however since there isn’t any monetary incentive to not, it is usually thought of the most recent age to start out amassing.)

And make no mistake about it: Many seniors are very happy to get their arms on their advantages as quickly as doable, making 62 the most popular age to file. But in recent times, the variety of Americans claiming advantages at age 62 has dwindled, thereby reflecting a optimistic shift in how staff strategy their submitting methods.

Senior couple at a laptop on a kitchen counter

Image supply: Getty Images.

Back in 2004, 50% of males and 55% of ladies filed for Social Security at 62. But in 2016, solely 32% of males and 37% of ladies did the identical. If this development continues, we’re apt to see a rising variety of seniors who’re in a position to get more cash out of this system — and reside extra comfortably in retirement as a end result.

The downside with submitting early

If it weren’t for the truth that submitting early leads to a discount in advantages, it will clearly make sense for most people to assert Social Security at 62. But submitting for advantages earlier than reaching full retirement age (FRA) will trigger your advantages to be slashed robotically, which implies you stand to lose a giant chunk of your month-to-month revenue over the course of retirement.

Here’s what full retirement age seems to be like for immediately’s staff:

Year of Birth

Full Retirement Age




66 and 2 months


66 and four months


66 and 6 months


66 and eight months


66 and 10 months



Data supply: Social Security Administration

Now lets say you had been born in 1960 and stand to gather $1,400 a month in Social Security in case you file at FRA. Taking advantages at 62 as a substitute will reduce your month-to-month funds all the way down to $980, which implies you stand to lose out on $5,040 of annual revenue all through retirement. That’s a lot of cash to half with in case you’re behind on financial savings.

And sadly, most Americans are behind on financial savings. The common family aged 56 to 61 has simply $163,577 put aside for retirement, in response to the Economic Policy Institute. Now that may appear to be a first rate sum of money, however once we apply a 4% annual withdrawal rate, which is what most monetary consultants advocate beginning with, that leads to simply $6,543 in yearly revenue — hardly sufficient to reside on. Therefore, to gather solely $11,760 on prime of that ($980 x 12 months), as against $16,800 ($1,400 x 12 months) makes a large distinction. There lies the hazard of leaping the gun on Social Security, so the truth that fewer individuals are making that mistake is encouraging.

Of course, submitting for Social Security at 62 is not all the time a dangerous concept. If you have misplaced your job or are unable to work and want these advantages to pay your dwelling bills, you are higher off claiming Social Security than racking up bank card debt to maintain up together with your payments. Furthermore, in case your health is poor and you do not anticipate to reside a lengthy life, you will usually get more cash from Social Security in your lifetime by submitting as early as you’ll be able to. Finally, you probably have a wholesome nest egg and do not want your advantages to pay the payments however moderately need the cash to get pleasure from your golden years sooner, there isn’t any hurt in submitting at 62. But except these circumstances apply to you, you are usually higher off being affected person and holding off on advantages till you attain FRA.

That stated, there’s additionally the choice to delay advantages previous FRA and enhance them by eight% a yr up till age 70. Though the overwhelming majority of seniors who acquire Social Security file previous to 70, in case you’re in a position to maintain out that lengthy, you will snag a sizable increase in your month-to-month funds that may stay in impact for the remainder of your life. And that is a good technique to get rid of a few of the monetary worries you might need going into retirement.

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