New York Estate Planning & Elder Law Blog
According to USA Today, nearly 64 million people receive a Social Security benefit check each month. Of the 64 million, more than four out of 5 are senior citizens, with approximately 62% counting on their monthly payout for at least half of their income.
The single most important decision senior citizens will make, is deciding when to begin taking Social Security benefits. Today, seniors can claim Social Security benefits when they retire and are age 66 through 67, depending on year of birth. Social Security benefits can also be taken as early as age 62. The retirement age is significant because it determines how much seniors would be paid each month by Social Security.
Over half a dozen factors are considered by the Social Security Administration (SSA), that can impact what you’ll receive from Social Security. Most seniors are aware that your work and earnings history are two such factors. SSA will take your highest-earning, inflation-adjusted years into account when calculating your monthly payout at full retirement age. This is why working in your 50s and 60s can be so important to boosting your overall benefit.
Birth year is also another factor. Your birth year determines your full retirement age (the age at which you become eligible for 100% of your monthly payout). Claiming your retirement benefit at any point before hitting your full retirement age will result in a permanent reduction to that payout.
There is an upside though. Taking your benefit after you hit your full retirement age will result in a boost to your benefit amount, over and above the full payout you’re due. In 2022, the full retirement age will peak at age 67, for those born in 1960 or later .
A fourth factor is your claiming age. What makes this decision hard is that there’s no one size fits all guidelines that everyone can follow as to when to take their payout. The best age for you to claim benefits is wholly based on your unique and specific financial, marital, and health status. Another often overlooked consideration that makes waiting to claim Social Security benefits past the retirement age is that each month beginning at age 62 your payout will grow up to 8% annually for each year you hold off on taking your benefit. This increase continues until age 70.
Avoid or delay as long as possible taking your benefit early, if you have little or nothing saved for retirement. You can expect to face financial hardship in your waning years if you take your benefits early and have little or nothing saved for retirement. That is in fact, the single biggest claiming mistake retirees can make. Think about working longer to minimize the impact of poor savings.