Most Americans claim Social Security retirement benefits before reaching their full retirement age. In fact, 54% of men and 61% of women claimed their benefits early in 2015, the most recent year for which complete data is available. Here's a breakdown of the data, and what claiming Social Security early (or late) could mean to you.
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When do Americans claim their Social Security benefits?
Of those who don't claim benefits before full retirement age, most claim benefits exactly at full retirement age.
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In other words, the vast majority of Americans don't delay Social Security beyond their full retirement age. Of the roughly 2.8 million Americans who claimed Social Security retirement benefits in 2015, here's a breakdown of their ages when they started collecting their monthly payments.
Data source: Social Security Administration 2016 Statistical Supplement. Percentages may not add to exactly 100% because of rounding.
Also, it's important to mention that in the table, the percentage of Americans claiming Social Security at their full retirement age is deceptively high. Specifically, people who receive Social Security disability benefits automatically transition to retirement benefits at full retirement age -- they don't have a choice in the matter.
When you only consider people who chose their Social Security claiming age, we find that an even greater percentage claimed before full retirement age -- 64% of men and 72% of women.
What is your full retirement age?
Full retirement age, also known as normal retirement age, for Social Security purposes depends on the year you were born.
If you were born in 1954 or earlier, your full retirement age is 66. If you were born in 1960 or later, your full retirement age is 67. And finally, if you were born from 1955 to 1959, your full retirement age is between the two. Here's a chart to help you find your full retirement age:
Data source: Social Security Administration.
The effects of claiming Social Security early (or late)
When determining your Social Security benefit, your earnings throughout your career are indexed for inflation and applied to a formula. This formula determines your primary insurance amount, or the amount you'll get if you claim benefits at exactly your full retirement age.
However, you can choose to claim Social Security as early as age 62, or you can wait until as late as age 70. If you claim at any age other than your full retirement age, your benefits will be permanently modified to reflect this choice.
If you claim Social Security before you reach your full retirement age, your benefits will be permanently reduced by the following percentages:
- 6 2/3% per year, or five-ninths of 1% per month, for up to 36 months before reaching full retirement age.
- 5% per year, or five-twelfths of 1% per month, beyond 36 months early, up to age 62.
The result is that if your full retirement age is 67, and you choose to claim Social Security at age 62, your benefit will be permanently reduced by 30%. As you can imagine, this reduction could make a big difference in your retirement income and should be taken into careful consideration.
On the other hand, waiting until after your full retirement age will result in a permanent increase of 8% per year, or two-thirds of 1% per month that you choose to wait, up to age 70.
When should you claim Social Security?
To be clear, there is no one-size-fits-all ideal age to claim Social Security. That's why the Social Security Administration allows an eight-year window. There are good reasons for claiming early, such as leaving work before full retirement age. There are also good reasons for claiming at full retirement age or later, such as maximizing your retirement income.
The bottom line is that it's important to consider your life situation, as well as the financial consequences, of claiming Social Security at various ages, before making your decision.
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