Everyone eligible for social security can begin taking it at age 62, but benefits are reduced by 30%. Full retirement age for people born in 1960 or later is age 67, and I will use that age in this video, although some, like me, reach FRA a few months earlier. And, if you delay getting benefits up until age 70, you get an 8% per year increase in benefits for each year of delay. Beyond age 70, you get no increase in benefits for waiting.

• The average retired worker benefit in 2024 is $1,907, which I will round up to $2,000 for simplicity. First, the benefit spread between age 62 and 70 is considerable, even ignoring cost of living allowances. A 62 year old would get $1,400 a month and a 70 year old would get $2,480 a month, a $1,080 a month difference! Of course, by the time he reaches age 70, the 62 year-old retiree would have already collected $103,680!

• At first glance, your analysis is simple, you calculate your cross-over date when the benefit of taking a smaller benefit early is eclipsed by taking a larger benefit later, and an calculator at Calculator.net makes this easy.

• If you compare retiring at age 62 to age 67, your break even point is at age 76. 62 v. 70? The break even point is age 78. The calculator lets you manipulate anticipated cost of living increases and return on the money if you invested it. And hold that thought about the cost of living increase, we’ll get to that later. But you get the basic idea.

• At first blush, it looks like a return of 8% per year on your “investment” in social security is a good one. But that ignores the statistic that there is a chance you will die in any given year, in general about a 2.5% chance for men and a 1.6% chance for women in their 60’s. If you die before you collect social security, you get nothing. It’s simplistic, but if you reduce your rate of return by your chance of death, the 8% per year increase looks a lot less attractive.

• But, there are additional benefits to waiting to take social security, two of these are potential spousal benefits and an increased Cost of living adjustment, or COLA amount.

• In the modern world, most married couples have individual social security eligibility, so the spousal benefit is not as important as it once was, but at FRA a spouse of ten years or more is eligible for ½ of your social security benefit, and that eligibility continues after you die. Taking social security early can decrease the potential spousal benefit by 35%, but taking it at FRA can increase the benefit. To better provide for your spouse, you might want to delay your benefit date.

• In 2023, the COLA was a whopping 8.7%, so we will use that figure in this example, although in 2024, it is a more typical 3.2%. The COLA is calculated on a reduced benefit if you collect SS early, so in our earlier example, a 62 year old retiree with a $1,400 benefit would get a cola of $121.80 per month, while a person at FRA would get $174 and a 70yo would get $215.76. And, just like compound interest, the difference increases with each passing year.

• However, the social security fund is predicted to be unable to fully cover benefits starting in about 2034, when, without change, the benefit would be reduced to about 80% (these figures vary from estimate to estimate). That this would occur was once unthinkable, but in an era of Congressional dysfunction, it has become less unthinkable. Some people may want to get benefits early because they doubt they will be fully available in the future.

• Another issue is that Social Security can start at age 62, but Medicare does not start until age 65, and a number of seniors utilize the Affordable Care Act for health insurance in the gap years. Recently, federal legislation has given ACA recipients a generous subsidy, that can amount to tens of thousands of dollars for a senior couple. In the past, there was a subsidy cliff where earning a dollar over 400% of the poverty level resulted in a complete loss of the subsidy. The current subsidy plan is scheduled to expire in 2025 and the cliff will be reinstated, so people retiring at 62 might want to be sure that the social security benefit will not potentially put them over the cliff and eliminate their ACA subsidy.

• On the other side of the spectrum is the income-related monthly adjustment amount (IRMAA) imposed on higher income Medicare recipients. If you take benefits at age 62, you may be unaware of this fairly steep penalty which will apply when you get Medicare at age 65.

• With all this in mind, it strikes me that before deciding at what age to take social security, you should do an income and tax analysis for at least the period from age 62 to 70, and probably longer if you will be subject to taking required minimum distributions from a taxable IRA at age 73….(read more)

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When to start collecting Social Security benefits is an important decision that many individuals will face as they approach retirement. While there is no one-size-fits-all answer, there are several key factors to consider when determining the best age to start receiving benefits.

The earliest age at which you can start receiving Social Security benefits is 62, but doing so will result in a reduced monthly benefit. On the other hand, waiting until full retirement age (which is currently 67 for those born in 1960 or later) will result in receiving your full benefit amount. Additionally, for each year you delay claiming benefits past your full retirement age, your benefit amount will increase by 8% up until age 70.

So, what is the best age to start Social Security? It really depends on your individual circumstances and financial situation. Here are a few factors to consider when making this decision:

1. Health and longevity: If you expect to live a long and healthy life, it may make sense to delay claiming Social Security benefits in order to receive a higher monthly benefit for the rest of your life. On the other hand, if you have health issues or a family history of shorter lifespans, it may be advantageous to start receiving benefits earlier.

2. Financial needs: If you need the money to cover basic living expenses, it may make sense to start receiving benefits earlier, even if it means a reduced monthly benefit. Conversely, if you have other sources of income to rely on, waiting to claim benefits could provide a higher income in the long run.

3. Employment status: If you plan to continue working past your full retirement age, it may be beneficial to delay claiming Social Security benefits in order to maximize your future benefit amount. However, if you are unable to work or have been forced into early retirement, claiming benefits earlier may be necessary.

4. Spousal benefits: If you are married, divorced, or widowed, it’s important to consider how your decision will impact your spouse’s or ex-spouse’s benefits. There may be strategies to maximize overall household benefits by coordinating the timing of when each spouse claims Social Security.

Ultimately, the best age to start Social Security will vary from person to person. It’s important to carefully consider your unique circumstances and consult with a financial planner or Social Security expert to help make an informed decision. Additionally, before making any decisions, it’s important to fully understand the rules and implications of claiming Social Security benefits at different ages.

In conclusion, the best age to start Social Security is a personal decision that should take into account factors such as health, financial needs, employment status, and spousal benefits. By carefully considering these factors and seeking professional advice, you can make the best choice for your individual situation.