What are the benefits and disadvantages to going early or waiting to apply for benefits?
The decision to apply for Social Security depends on your circumstances. You can start collecting benefits at 62 or wait until you’re 70, according to the Social Security Administration (SSA).
But a lot can happen in that window. Many with health conditions may choose to take Social Security early, while others who want to continue working might postpone it. What are the benefits and disadvantages to going early or waiting to apply for benefits?
What Is Full Retirement Age?
Full retirement age (FRA) depends on the year you were born. According to the IRS, for those born in 1960 or later, the FRA is 67. At that age, you’ll receive 100 percent of your retirement benefit. Those who were born between 1943 and 1959 reach FRA at 66.
For this article’s purpose, 1960 will be used when giving an example.
Taking Retirement Benefits Early Affects Dollar Amount
If you take Social Security benefits early, the amount you receive will be lower than if you had waited until FRA. And you will not be able to receive those or make that reduction up. You will still receive cost-of-living adjustments (COLAs). But you won’t receive what you would have had you waited until 67.
According to the IRS, if you apply for benefits at 62, you will receive 70 percent of what you would have if you had waited until FRA. The following are the percentage amounts you’d receive for waiting additional years:
- 63: 75 percent
- 64: 80 percent
- 65: 86.7 percent
- 66: 93.3 percent
- 67: 100 percent
That means that if your FRA benefit would have been $1,000 at 67 and you start collecting benefits at 62, you’ll receive $700 plus COLA for the rest of your life. The spousal benefit (survivor) is reduced to 32.5 percent.
Increase in Benefits When You Wait to Apply
You can also choose to work beyond your retirement age and not take benefits. According to the IRS, if you choose to do this, 8 percent is added to your benefit for each full year past your FRA until you reach 70.
Regardless of whether you wait, you must still apply for Medicare at 65, or you’ll be penalized.
By Anne Johnson
