When to begin collecting Social Security retirement benefits falls squarely into the category of "difficult decisions" – too many options resulting in too many outcomes. The Social Security Administration says you can begin when you turn 62, but there are a few good reasons why you might want to wait, even until you reach age 70, in some cases.
Taking Your Benefits as Soon as You Become Eligible
Collecting Social Security at age 62 might be a real godsend if you find yourself with no other source of income due to health or other issues. But there’s a drawback.
If you begin collecting at age 62, the SSA takes the position that you’ll therefore be collecting for a longer period of time. It bases this presumption on statistics that calculate the average life expectancy for men and women born in the same year. Think of your benefits as a big bucket of money. If you divide that bucket into 100 piles, each pile will be significantly smaller than if you divided it into just 50 piles.
If you begin collecting Social Security benefits before you reach full retirement age, you'll receive less each month. How much less depends on how many months before your full retirement age (FRA) you begin collecting. Each month represents another little pile of money, and the money as to be redistributed to create additional piles.
If you were born in 1955 and you’re eligible for $1,000 a month in benefits when you reach full your retirement age, there would be approximately 50 months between the time you turn 62 and your FRA – 50 additional months that your bucket would have to stretch to cover. So you would receive only $741 a month in benefits instead of $1,000.
If you’re married, the $500 a month your spouse would be entitled to would drop as well, to $345. Your spouse can collect benefits based on your earnings record, but his benefits are affected by these rules just the same way yours are.
And there’s one more wrinkle. This reduction in benefits is permanent. You won’t begin receiving more money each month later when you finally do hit full retirement age. But if this is your only source of income, it’s far better than nothing.
If you decide to collect early, you begin receiving benefits in the first full month that you’re 62 years old. So if you turn 62 on May 15, you can begin collecting in June.
If You Begin Collecting at Full Retirement Age
So what is your full retirement age, anyway? Unfortunately, there’s no one easy answer to that.
It depends on the year in which you were born. If you were born between 1943 and 1954, your FRA is 66. But then two months are added per year for birth years beginning in 1955, capping out at age 67 for those who were born in 1960 or later. If you were born in 1957, for example, you’d have to wait until age 66 and 6 months – two months each are added for years 1955, 1956 and 1957.
The good news is that if you wait until this age, you’ll receive the full monthly benefits you’re entitled to – there’s no reduction in the monthly amount. And yes, this applies to your spouse's share also if he's chosen to collect on your work record.
The Years Between Full Retirement Age and Age 70
Just as those piles of money from your bucket dwindle in amount for each month you retire before your FRA, they grow a little for each month you wait beyond full retirement age – at least until you reach age 70.
That’s the age at which you’ll receive the most each month if you wait that long, and the amount is capped there so there’s no real benefit in waiting beyond this point. If you were born in 1943 or later, your monthly benefits will increase by 2/3 of 1 percent for each month you wait after you reach full retirement age.
Of course, you’ll never get to collect all this “bonus” money if you die before age 70, but if you’re robust, hale and hearty and you believe you’ll probably live well beyond age 70, there can be a benefit in waiting, if possible. That top-out amount that you begin to receive at age 70 will be paid to you every month for the rest of your life. It never decreases.
Working vs. Not Working
Things can get a little more complicated if you decide to continue to work and collect Social Security.
If you begin collecting benefits before you reach full retirement age, your monthly benefits will be reduced even more if you pass certain earned income thresholds. Income includes money you receive from employment or self-employment. As of 2017, the SSA will deduct $1 from your monthly benefits for every $2 you earn over $16,920 annually. (Ref 3)
But this is only if you were under full retirement age for all twelve months of the year. The SSA relents a little in the year you reach your FRA. It deducts $1 for every $3 you earn, and the threshold increases all the way up to $44,880 as of 2017. And these deductions only occur in the months before you reach your FRA. If you were born in May, only income from January through April would be counted. (Ref 3)
This reduction isn’t permanent. The SSA will recalculate your monthly benefits to begin paying you this deducted money back in monthly increments after you reach full retirement age. You’ll get the money back eventually. (Refs 1, 3, 6) And, of course, you can earn all you like as soon as you reach full retirement age – no more earnings penalties are deducted. (Refs 3, 6)
And here’s another bit of good news. If you’re still working, you’re still paying into Social Security. This has the potential of eventually upping your benefit amount. (Ref 3)
What If You Change Your Mind?
If you’re no clearer now about when you want to begin collecting benefits, you can relax in knowing that the SSA is at least somewhat forgiving of missteps or changes in circumstance.
Maybe you lost your job at age 63 and began collecting benefits in any effort to replace some of that lost income. Then you land a new job and you really want to wait until full retirement age or later to begin taking those benefits, particularly since your earnings will temporarily reduce your benefits.
You’re allowed to change your mind, but there’s a catch. You have to pay back all the benefits you’ve received so far, and you can only do this for up to one year after you begin collecting. It’s something of a reset button. You can start collecting all over again at a later date just as though those early months never happened. (Ref 6)
The Bottom Line
The total amount of Social Security you can collect is finite – it’s that bucket of money. If you begin collecting benefits as soon as you’re able at age 62, you’ll receive less per month for as long as you live. But if you wait until you've passed full retirement age, you’ll add to your bucket with no penalty or deduction for any earnings – at least until age 70 so at that point you might as well put your feet up and relax.
- Social Security Administration: Retirement Planner – When to Start Your Benefits
- Social Security Administration: Retirement Planner – Delayed Retirement Credits
- Social Security Administration: Retirement Planner – Getting Benefits While Working
- Social Security Administration: Full Retirement Age – Benefits By Year of Birth
- AARP: When Should I Start Social Security Benefits?
- Charles Schwab: When Should You Take Social Security?
- Social Security Administration. "Benefits Planner: Retirement, Benefits By Year Of Birth." Accessed Feb. 22, 2020.
- Social Security Administration. "Benefits Planner: Retirement, Full Retirement Age." Accessed Feb. 22, 2020.
- Social Security Administration. "Benefits Planner: Retirement, If you were born between 1943 and 1954 your full retirement age is 66." Accessed Feb. 22, 2020.
- Social Security Administration. "Benefits Planner: Retirement, Delayed Retirement Credits." Accessed Feb. 22, 2020.
- Social Security Administration. "Benefit Reduction for Early Retirement." Accessed Feb. 22, 2020.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.