When Should I Start Collecting Social Security?

You can start collecting Social Security payments once you hit the age of 62. However, is it wise to do so?

That depends on your situation. For most people, though, it makes more financial sense to wait at least until the age of 66. That is the age when people born from 1943 to 1954 first qualify to receive full Social Security benefits. That full retirement age increases for people born after 1954, hitting a maximum of 67 for anyone born after 1960 and later.

Wondering when you should begin collecting Social Security? You will have to take a long look at your health and your finances to make the right decision.

Retiring early

It can be tempting to retire early and begin collecting Social Security benefits before you hit the age of 66. The thought goes like this: I have been paying money into Social Security my whole life. Why shouldn’t I start collecting it as soon as possible?

You can start collecting Social Security once you hit the age of 62. However, there’s a financial penalty that comes with collecting at such an early age: You will receive less money each month than you would have had you waited until you turned 66.

The Social Security Administration website provides a Social Security benefits calculator that tells you how much your monthly benefits will fall if you begin collecting payments before full retirement age.

For instance, primary wage earners who retire at 62 will receive just 75 percent of their full benefits. Spouses of that wage earner will receive only 35 percent of their total benefits if they retire at age 62.

As an example, if you are scheduled to receive $1,000 a month in Social Security benefits at full retirement age, you will receive just $750 a month if you start collecting at age 62 instead.

That might not seem like a big difference: It is only $250 less each month, after all. However, over a year that $250 a month comes out to $3,000 that you passed up. Moreover, over a retirement where it is not unusual to expect to live to 87? If you retire at age 62 and begin collecting Social Security then, you would lose a total of $75,000 by not waiting until age 66 to collect Social Security.

Suddenly, that $250 a month seems like a bigger deal, right?

The benefits of retiring later

Collecting Social Security before full retirement age comes at a financial cost. The flip side is that waiting to collect until after that age comes with a monetary benefit.

You will receive more money each month every year you put off collecting Social Security, up until you hit the age of 70.

If you are scheduled to receive $1,000 a month at the age of 66, you will receive $1,320 a month if you wait until age 70 to receive your Social Security payments.

That is a difference of $320 a month or $3,840 a year.

The numbers, then, make retiring later sound like the smartest choice. However, remember, every situation is different.

Extenuating factors

There is one critical extenuating factor in this equation: Your health.

If you expect to live a long life after retirement, then it makes financial sense to begin collecting Social Security payments when you are older.

However, what if you are already suffering from health problems and don’t expect to live much past 70? Then it might make financial sense to start collecting your Social Security payments as early as possible.

The problem with this? We cannot predict how long we will live. We can only make predictions based on our present conditions. Health can change rapidly, for both the better or, the worse.

Age 78 is considered the break-even point when it comes to Social Security benefits. If you live past that age, waiting until full retirement age to collect payments will pay off. If you do not make it that far? You would have been better off collecting your payments earlier.

Again, the trick lies in predicting how long you will live. According to the Social Security Administration, men who turn 65 in 2018 can expect to live for another 19.3 years, putting them at more than 84 at death. Women who turn 65 in 2019 can expect to live another 21.6 years. In both cases, these average people would have lived past the break-even point of 78.

The Social Security Administration recommends taking a look at your family history. Did your parents, grandparents and other relatives live into their 80s? If they did, and if you are not suffering from any significant medical problems, you might expect to hit your 80s, too. If so, waiting to collect Social Security payments might be the right move.

There are other factors that could influence your decision. For instance, if you quit work early will you have to seek private health insurance? For the most part, you will not be covered by Medicare until you hit age 65. The cost of private insurance until you reach that age might outweigh the financial benefits of receiving your Social Security payments early.

Are you struggling with credit card and other types of debt? You do not want to enter your retirement years saddled with large amounts of debt. If waiting to collect Social Security will cause you to add to your consumer debt, taking out benefits sooner might make more financial sense.

As you can see, it is not easy deciding when to begin collecting your Social Security benefits. Your best bet is to meet with a certified financial planner who can look at your finances and help you make the right decision for yourself and your spouse. That is not a choice to rush into; you will be living with the consequences of your decision, both good and bad, throughout the entirety of your retirement years.