Should You Delay Taking Social Security?

Once you retire, you might find yourself fielding financial concerns. Did you plan enough? What will it be like living on a fixed income? How do you handle the rising cost of living? Financial worries in retirement are common and understandable. However, Social Security can provide a much-needed safety net for many people. Most Americans can claim Social Security as early as 62, but it may be worth holding off for a few years to maximize your benefits.

The Pros and Cons of Taking Social Security Early

There are many advantages to taking Social Security benefits early. Taking Social Security at 62 means money in your pocket right away, which can be helpful if you no longer have a reliable source of income. You might also want to take Social Security early to pay off any outstanding debts before retirement — that way, you won’t need to budget payments into the money you set aside for daily life.

If your company offers early retirement, you might be incentivized to take Social Security early to access various benefits like payments for accrued vacation time, cash, and bridge payments equal to Social Security payments. If you have a spouse or dependents eligible for benefits that can only be accessed once you receive your Social Security, consider starting early to benefit the family.  

However, if you accept Social Security at 62, you will only receive 70% of your maximum benefits. This is because of a concept known as “full retirement age,” which is 65 for people born before January 1, 1960, and 67 for anyone born after. Claiming Social Security benefits before reaching full retirement age means leaving money on the table, and the longer you hold off, the more the percentage increases until you reach 67, when you’ll receive 100% of your entitled amount.

Why It’s Worth Waiting Until 70

While the full retirement age in America is 67, additional financial benefits exist for people who wait to turn 70 before claiming Social Security. Waiting until you are 67 may earn you 100%, but the longer you wait, the more you will receive. People who wait until age 70 receive their full benefits. While waiting means you’re leaving money on the table in the short term, the extra amount you’ll earn in the long run will make up the difference. 

Other Things to Consider

Your age isn’t the only thing to consider when determining when to take Social Security. If you’re married upon reaching full retirement age, you can take 100% of your benefits or 50% of your spouse’s — whichever amount is higher. Your spouse does not have to be of retirement age for this, though they will have to wait until they reach retirement age to claim your benefits. If you’re divorced but were married to someone for at least 10 years, you can claim up to 50% of their full retirement benefits. Widows and widowers can also claim 100% of their spouse’s intended retirement benefits.

If you are still earning a salary, that can reduce your Social Security benefits if you claim it early. While these penalties are temporary, the Social Security Administration will recalculate your benefit amount after retirement and credit you for withheld benefits.

If you are still employed at 62 or above and haven’t reached full retirement age, then you’ll have your Social Security reduced by $1 for every $2 you earn above the annual limit (that limit is $22,320 in 2024). In the year that you turn 67, these penalties relax, and $1 will be deducted for every $3 you earn above the limit ($59,520 in 2024). Once you turn 67, no money is withheld, even if you earn an additional salary.

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