Many people start planning their retirement by assuming they retire at age 65. But this is not the best option for everyone.

Or it may not be, but Social Security is the most powerful source of income for many retirees, and that level of income can change dramatically depending on the age at which they start claiming benefits. As retirement planning becomes more involved, assumptions change, and potential retirees need to make sure they consider all the options and understand the implications. when: they retire before the case is settled.

Delaying benefits has a clear advantage

The amount of your monthly Social Security benefit is based on your lifetime earnings, change in living expenses և age when you start receiving benefits. The sooner you turn on Social Security revenue streams, the smaller your monthly checks will be. The later you wait to start, the bigger your monthly checkup will be.

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Full retirement age (FRA) is the Social Security Administration’s expression for the age at which you are entitled to 100% of your benefit. For those born before 1955, it is now 66 years old, and for those born after 1960, up to 67 years old.

If you start claiming Social Security at age 65, you will not receive your full payment. Your monthly benefit will be reduced by 13.3% if we assume a full retirement age of 67 years. The average social security benefit is expected to reach $ 1,657 in 2022. The 13.3% reduction may seem modest, but it does mean that the average recipient will receive $ 220. less every month.

A retired couple entering the program at the age of 67, who each receive the average amount, will accumulate $ 39,768 in annual family income from the program. The two-year start-up will reduce that annual income to $ 34,478. This is a significant difference in cash flow: it only gets bigger if you are one of the recipients who are eligible to claim a maximum of $ 3,895 per month at age 67.

Delaying full retirement age allows retirees to accumulate more than 100% of their benefits. Your monthly allowance increases by 8% for each year you defer collection. There is no bonus for deferring the age of 70, but it is still a 24% higher benefit for people who claim benefits at age 67 at full retirement age.

Of course, every situation is different. You can check your own statements with the Social Security Administration to personalize your numbers to find out when is the best time for you to start your Social Security claim.

You can collect earlier

The benefits of postponing retirement until full retirement (և after that) are fairly straightforward, but you can argue for Social Security even earlier. It really depends on your personal circumstances, what you are trying to achieve.

The first consideration is really a mathematical problem. If you wait until you are 70, you will get more every month. However, you will receive these payments in less than a few months, so it will take some time for the payments to equalize.

For example, Mr. Smith earns enough to earn an average of $ 1,657 a month at age 67. If we ignore the cost of living adjustments over time, Mr. Smith will have approximately $ 70,000 in total benefits, starting with age. 62 years old, not to wait until full retirement age. If Mr. Jones corresponds to an average of $ 1,657 a month and begins making payments at age 67, how much of each of the total benefits will not exceed (so-called equal age) until age 78 և eight months. But if they both live longer than that, Mr. Jones will start accumulating more each month.

This means that if you think you will live to be at least 79 years old or older, you will need to delay the start of benefits as you generally move forward. If your health, your lifestyle, or your genetic history suggest that you are unlikely to live to that age, getting Social Security may be a better option. It’s hard to know for sure, but some people can be quite educated guessers.

It can also take into account your needs, desired lifestyle, and financial resources outside of Social Security. The earliest years of retirement are often the most active (: most expensive). Every day is a sudden week և Your mid-60s can be the best time of your whole life to travel, eat out, or enjoy countless hours of other activities. Social Security can provide the extra cash flow you need to enjoy your golden years comfortably.

You can also make sure you get the right amount out of your retirement account, especially early. “Today’s economic environment has forced financial planners to reconsider the 4% downward rule.” Immersing your retirement savings too quickly can explode the program. There is a real risk that you will run out of money if your 401 (k) or IRA runs out too quickly. This is doubly true if there is a market correction that feeds into your savings accounts. Initiating Social Security benefits can help you save on your retirement plan.

Everyone is different

The best course of action really depends on personal circumstances and goals. Any decision you make on social security has its pros and cons, it’s impossible to know what to expect in the future. To ensure the best way forward, you need to know what numbers you are dealing with and make an informed decision.