Planning for Retirement? Don’t Forget This Crucial Step
As you approach retirement, you’re likely excited to leave the workforce behind and focus on yourself. But before you start receiving Social Security benefits, it’s essential to consider the financial implications of claiming them early or waiting.
The Cost of Claiming Early
You can start receiving Social Security benefits as early as 62, but doing so will reduce your monthly payments by as much as 25% to 30%. The penalty decreases as you approach your full retirement age (FRA), which is between 66 and 67, depending on your birth year. For example, claiming benefits 12 months before reaching FRA will only reduce your monthly benefits by 6 2/3%.
The Benefits of Waiting
On the other hand, waiting until you’re 70 years old can increase your monthly payments by 15% to 25% compared to claiming at FRA. The table below illustrates the significant financial difference between claiming early or delaying benefits:
| Birth Year | Full Retirement Age | Percentage of Full Benefit by Age at First Claim |
| — | — | — |
| 1943-1954 | 66 | 75, 80, 86 2/3, 93 1/3, 100, 108, 132 |
| 1955 | 66, 2 mo. | 74 1/6, 79 1/6, 85 5/9, 92 2/9, 98 8/9, 106 2/3, 130 2/3 |
|… |… |… |
Get Your Ducks in a Row
Before claiming benefits, make sure to:
- Compare your benefit options with the Social Security Administration
- Ensure you have a convenient way to receive direct deposit payments
- Verify the accuracy of your income history with the Social Security Administration
- Update or create a plan for your money in retirement
- Consider reshaping your investment portfolio and exploring higher-yielding money market funds
- Look into supplemental Medicare coverage if necessary
Maximizing Your Social Security Benefits
Knowing your numbers is crucial, but managing your money effectively during retirement is just as important. By understanding how to maximize your Social Security benefits, you can retire confidently with peace of mind. Discover how to learn more about these strategies and potentially increase your retirement income by up to $22,924 per year.
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