Retirement is one of the most significant milestones in a person’s career, and deciding when to retire is an important decision that affects your long-term financial security.
Among the key aspects of retirement planning is determining when to start collecting Social Security benefits. The timing of this decision plays a pivotal role in the amount of Social Security benefits you will receive throughout your retirement.
While some individuals may already be retired by the time they reach their full retirement age, many others face a decision when they reach this milestone. For those still in the workforce and considering retirement in 2025, this article will provide valuable information on how to make the right decision about when to begin collecting Social Security benefits.
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What is the Full Retirement Age?
First, it’s essential to understand the concept of full retirement age (FRA). FRA is the age at which you can begin collecting Social Security benefits without any reductions in the amount you receive. While the official FRA used to be 65, it has gradually been increasing over the years due to changes made to the Social Security program to keep it financially sustainable.
For workers born in 1960 or later, the full retirement age is 67 years old. This means if you were born in 1960 or after, you would reach FRA at the age of 67. However, this doesn’t mean that you must wait until you reach your FRA to start receiving benefits; you have options, each with its pros and cons.
Collecting Social Security Before Full Retirement Age
The earliest age at which you can begin claiming Social Security benefits is 62. For many individuals, 62 may seem like an appealing age to start collecting, especially if they are ready to retire.
However, it’s important to understand the drawbacks of claiming early. When you start collecting benefits at 62, your benefits will be reduced by a significant percentage—specifically, you will receive only 70% of the benefit amount you would have received at FRA.
For example, let’s say your maximum benefit at full retirement age in 2024 is $3,822. If you choose to retire at 62, your benefit would be reduced to approximately $2,710 per month. This is a substantial difference that can add up throughout your retirement.
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While some people may need to claim benefits early due to financial pressures or personal circumstances, waiting until FRA allows you to claim the full amount of benefits and maximize your Social Security income over your lifetime.
Why the Full Retirement Age is Rising
The reason the full retirement age is gradually increasing is tied to efforts to strengthen the Social Security program. Over the years, there have been multiple changes to the program aimed at ensuring its long-term viability.
One of the main changes made in the 1980s was raising the full retirement age from 65 to 67 for people born in 1960 or later. This increase was implemented gradually over some years, and as a result, individuals born after 1960 are the ones who will be affected by this adjustment.
The goal of raising the full retirement age is to reflect that people are living longer and healthier lives, which means that people can work for a few more years before retiring. It also helps alleviate some financial strain on the Social Security system.
When Should You Claim Your Social Security Benefits?
While claiming at full retirement age (67 for those born in 1960 or later) is the most beneficial option in terms of maximizing your Social Security benefits, there are also advantages to waiting even longer to claim. Each year you delay your claim beyond FRA, your monthly benefits will increase by a certain percentage (about 8% per year) until you reach age 70.
If you can afford to delay claiming your Social Security benefits, waiting until age 70 can lead to a much higher monthly benefit. For example, if you wait until 70 to begin claiming, your benefit could be significantly higher than the benefit amount you would receive at 67.
However, it’s important to balance the potential increase in benefits with your situation. If you’re in good health and can afford to wait, delaying your claim may be the best option. But if you need the income sooner, or if your health is a concern, claiming earlier may be necessary.
How and When to Apply for Social Security Benefits
Once you have decided to retire and start claiming Social Security benefits, it’s important to understand the application process. You can apply for benefits up to four months before your benefits are scheduled to begin.
To ensure everything is processed smoothly, it’s advisable to apply as close as possible to your full retirement age.
The Social Security Administration provides an easy way to apply for benefits online, and it’s important to use this time wisely to make sure all the necessary paperwork is completed accurately. If you’re unsure about when to apply or what benefits you’re entitled to, consider consulting a financial advisor who can help guide you through the process.
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