Have you ever wondered about when to claim Social Security benefits? If so, you are like millions of other Americans across the United States. The timing of when you claim your Social Security benefits could be one of the most important decisions of your retirement, and in general, most Americans incorrectly believe you should always claim at age 62.
First, I’ll explain how your monthly benefit is calculated. Your highest thirty-five years of income are summed up, and then this number is divided by 420 (the number of months in thirty-five years). This will give you your Primary Insurance Amount (PIA) or monthly benefit at full retirement age. Your full retirement age will depend on what year you were born.
Once you have calculated your PIA, you can determine how much of your Social Security benefit you will receive at different ages. For example, let’s say that your PIA is $1,000 per month. If you claim Social Security benefits at age 62, you will only receive $750 per month. If you decide to wait until age 70 to claim your benefit, you would receive $1,260 per month.
In the above situation, if you were to live until age 90, you would collect $252,000 of total Social Security benefits by claiming at age 62. If you waited until age 70 to claim, you would collect $302,400. That is a difference of more than $50,000! The timing of when you claim benefits can affect your retirement much more than you anticipate.
That doesn’t mean that every person should wait until age 70 to claim Social Security benefits. There are a few options to weigh when making your decision. You need to consider what other income you will have in retirement. That will certainly affect whether or not you can afford to wait to claim Social Security benefits. Another important factor to consider is your life expectancy. How long do you think you will live? That is equally as important of a question.
There are many factors that can go into when one should claim Social Security benefits. It can be a complicated question, and there are many factors to consider. A financial professional will have all the answers you need. If you have any questions in regards to when you should claim Social Security benefits, feel free to give us a call!