Essential Action for Retirees Before Accessing Social Security Benefits in 2025
Understanding the Impact of Claiming Age on Social Security Benefits
Claiming Social Security benefits is a crucial decision that can significantly affect both the monthly amount and the lifetime value of your benefits. The age at which you claim Social Security plays a vital role in determining the size of your monthly checks and the total amount you will receive throughout your retirement.
Effects of Claiming Age
- Claiming Early (age 62): Early claiming results in a reduced monthly payment, with a permanent reduction of approximately 30% compared to full benefits at Full Retirement Age (FRA). This reduction is calculated as follows: for the first 36 months of early claiming, a person loses 5/9 of 1% per month; after that, a person loses 5/12 of 1% per month. However, by claiming early, you will begin receiving payments sooner and receive more payments overall, even though each monthly check is smaller.
- Claiming at Full Retirement Age (approx. 67): At this age, you receive your full primary insurance amount (PIA), meaning 100% of your entitled monthly benefit based on your earnings record. If your birthday falls on any other day of your birth month, you are not eligible for benefits until the next month.
- Delaying Claiming (up to age 70): Delaying benefits beyond FRA increases monthly benefits by about 2/3 of 1% per month delayed, reaching a maximum bonus of 124% of full benefits at age 70. This means that if your FRA is 67, delaying benefits until age 70 could grow your checks by 24%.
Lifetime Value Impact
The Social Security system is designed so that the total lifetime benefits are roughly actuarially equivalent, assuming average life expectancy. Claiming early means smaller monthly amounts over a longer period, while claiming late yields higher monthly benefits but for fewer years. If you live longer than average, delaying benefits usually results in higher lifetime payments; if you have a shorter lifespan, claiming early may be more beneficial.
Additional Factors
- Continuing to work past FRA can increase your benefit amounts by adding higher earnings to your record.
- Benefit amounts are based on your highest 35 years of wages and adjusted for cost of living.
- Changes in full retirement age over time (currently fixed at 67 for those born in 1960 or later) affect when you can get full benefits.
Making an Informed Decision
Comparing your estimated lifetime benefits at different claiming ages helps you decide when you're most comfortable claiming Social Security. In your my Social Security account, you'll find a chart detailing your estimated monthly benefit at every possible claiming age. If you don't have a my Social Security account, you can set one up for free in a few minutes. This information is crucial for those signing up as soon as possible, as they will need to fund their expenses until their checks start arriving, with checks being paid in the month after they're due.
By understanding the impact of your claiming age on Social Security benefits, you can make an informed decision that best suits your financial needs and retirement goals.
- A common practice in personal-finance planning is to compare the estimated lifetime benefits at various claiming ages to make an informed decision about when to claim Social Security, as this can impact both the monthly amount and the total amount received throughout retirement.
- Delaying Social Security benefits until age 70 can significantly increase your monthly checks due to an ongoing increase of approximately 2/3 of 1% per month delayed, reaching a maximum bonus of 124% of full benefits, a difference that can greatly influence your personal-finance situation during retirement.
