Claiming Social Security is one of the most significant financial decisions you’ll make in retirement. It’s not just a matter of when you can start collecting—it’s about how your choice fits into the bigger picture of your financial future. Each age milestone—62, 67, and 70—offers unique advantages and trade-offs, and choosing wisely requires a deeper understanding of how the system works.
What You Need to Know First
Before weighing your options, it’s essential to understand three key components of how Social Security works:
First, your benefit amount is based on your 35 highest years of inflation-adjusted earnings. This calculation forms what’s known as your Primary Insurance Amount (PIA)—the benefit you’d receive at your Full Retirement Age (FRA).
Second, your FRA depends on the year you were born, ranging from 66 to 67 for most people nearing retirement today. At this age, you’re entitled to 100% of your PIA.
Third, you don’t have to start collecting at your FRA. Collect early, and you face a reduction; wait, and you earn delayed retirement credits that increase your monthly payment.
Age 62: Access Now, But at What Cost?
For many, 62 is an attractive age to start collecting benefits. The draw is immediate cash flow and the relief of not needing to dip into retirement savings as heavily.
However, this comes with caveats. Your benefit could be reduced by as much as 30% compared to waiting until your FRA. That reduction is permanent. And if you’re still earning income, you’ll face an earnings cap: in 2024, it’s $23,400. Earn more than that, and your benefit is reduced by $1 for every $2 over the limit.
Another hidden drawback? If you haven’t yet hit 35 full years of higher income, you might be locking in a lower PIA by stopping work during your peak earning years. And for those with spouses, a lower benefit now could mean a lower survivor benefit later.
Still, early collection has its place. If you need income or have health concerns that suggest a shorter life expectancy, collecting at 62 might make sense.
Age 67: The Practical Middle Ground
Waiting until FRA—typically age 67—means you’ll receive 100% of your PIA. This option strikes a balance between getting access to funds and maximizing your benefit.
Beyond that, Social Security income is tax-advantaged. Unlike withdrawals from IRAs or 401(k)s, Social Security may not be fully taxed—and most states don’t tax it at all. That makes each dollar go a bit further.
For those in average health and without pressing income needs, age 67 offers a solid blend of benefit size, tax efficiency, and portfolio preservation. It’s also a smart strategy for couples looking to optimize joint planning outcomes.
Age 70: Playing the Long Game
Delaying until age 70 maximizes your Social Security income—boosting your monthly benefit by up to 24% over what you’d get at 67. This higher, inflation-adjusted income lasts for life and provides a powerful buffer against longevity risk.
But there’s more: delaying benefits opens the door to strategic tax planning. With no Social Security income hitting your tax return in your early 60s, you may be able to perform Roth conversions at favorable tax rates.
Plus, higher Social Security income can serve as a stronger “floor” later in retirement, minimizing the severity of failure in scenarios where your other assets run low. This is especially important in Monte Carlo planning, where a higher benefit can soften the blow of poor market returns.
That said, delaying requires patience and sufficient savings. You’ll be drawing more from your portfolio in the short term, and there’s always the risk that you may not live long enough to reap the full rewards.
Putting It All Together
The decision of when to claim Social Security should never be made in a vacuum. It depends on your health, your income needs, your portfolio, and whether you’re planning just for yourself or for a spouse as well.
- If you need income now or have a shorter life expectancy, age 62 could be right.
- If you want balance and certainty, age 67 offers a solid option.
- If you’re focused on maximizing guaranteed income and protecting against longevity, age 70 delivers the highest payout.
Each option has trade-offs, but by understanding how the system works and how it aligns with your financial picture, you can make a confident, well-informed decision.
The information presented is for educational and informational purposes only and should not be construed as personalized investment or financial advice. The content discusses general retirement planning strategies and is not intended to recommend any specific course of action for any individual.
Social Security claiming strategies involve a number of variables, including life expectancy, portfolio returns, tax considerations, and personal circumstances. Decisions regarding Social Security benefits should be made in consultation with your financial advisor, taking into account your full financial picture.
This content may include discussions around advanced financial planning strategies such as Roth conversions, backdoor Roth IRAs, tax loss harvesting, charitable giving, estate planning tactics, or Social Security claiming strategies. These concepts are general in nature and are not personalized advice.
Suitability for these strategies depends on your individual tax situation, income, age, investment profile, estate plan, and other factors. Actions related to these strategies may trigger tax consequences or legal implications. Always consult with your CPA or attorney to assess suitability based on your personal financial circumstances.
This content may also include hypothetical or forward-looking performance examples, including Monte Carlo simulations. These are intended to illustrate concepts and do not reflect actual investment results or guaranteed outcomes.
Assumptions used in simulations may not reflect real-world market conditions or client behavior. Actual results may vary significantly.
Examples provided are hypothetical and for illustrative purposes only. They do not reflect any specific client situation and should not be relied upon for investment decision-making. Past performance of investments is not indicative of future results. All investing involves risk, including the potential loss of principal.