Deciding whether to take Social Security benefits at age 62 or wait until 67, the full retirement age, is a significant financial decision. For many retirees, Social Security is a big part of their income and the longer you wait, the more money you can collect.
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While everyone’s situation differs, several factors, like health, financial goals and income needs, should be taken into consideration before making a decision. Knowing your options can make an impactful difference in your retirement income, so here is what you need to know about taking Social Security at age 62 and 67, according to financial experts.
Understanding Your Full Retirement Age (FRA) and Primary Insurance Amount (PIA)
Understanding how Social Security calculates benefits is vital to your retirement income. Your full retirement age (FRA) — the age at which you’re eligible to receive 100% of your Social Security retirement benefits — and your primary insurance amount (PIA) — the monthly benefit you’ll receive at your FRA are two key pieces of information about Social Security.
You can find out what you’re entitled to by setting up a free account on the Social Security Administration (SSA)’s website.
“Let’s say your primary insurance amount is $1,000 at your full retirement age of 66, which means $1,000 per month will be sent to you from Social Security,” according to Eric Mangold, certified wealth strategist (CWS) and founder of Argosy Wealth Management. “If you choose to collect it at age 62, you won’t receive $1,000 per month; you will receive $750 per month, which is 25% less.”
However, if you wait until age 70, which is when your benefit stops growing (outside of the cost-of-living adjustment given almost every year), that $1,000 becomes $1,320 per month, which is 30% more, Mangold explained.
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Why Taking Social Security at 62 Might Not Be Worth It
There are plenty of reasons to take your benefits at 62. You’ll have access to funds immediately to help support your lifestyle or pay bills. You could also use the money to invest and help grow your retirement funds. However, at 62, the biggest drawback to taking Social Security is the permanent reduction in your monthly benefit.
“You’ll receive about 25 [to] 30% less than if you waited until full retirement age,” said Danny Ray, founder of PinnacleQuote. “That smaller check doesn’t just impact you now, it also means less cost-of-living adjustment over time and, above all, a lower survivor benefit for a spouse.”
Ray added, “If you keep working, your benefits may be reduced due to the earnings test, which can make the decision less attractive if you still have a steady income.”
What Happens if You Wait Until 67 to Claim Social Security
If you’re in good health and have other sources of income, waiting to collect Social Security until 67 is an attractive option. You’ll receive higher monthly benefits, there will be increased Social Security benefits for spouses and long-term financial security.
On the other hand, waiting until 67 comes with its own trade-offs.
“The main con is the years of missed payments,” said Ray. “If you pass away earlier than expected, you might never collect what you put in.”
The right choice really depends on your situation and taking into account your health, marital status, savings, and work plans. And knowing how to file is essential.
“One thing I always remind people is that Social Security was designed as a safety net, not your entire retirement plan,” Ray said. “Building multiple income streams alongside it gives you far more flexibility and peace of mind.”
Speaking with a trusted financial advisor who is familiar with the system can also be helpful, Mangold advised.
“The folks at the Social Security Administration can be nice and try to help, but their expertise lies in the process of how to collect-they are not supposed to give advice,” he concluded.
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This article originally appeared on GOBankingRates.com: I’m 62: Should I Take Social Security Now or Wait Until 67
