What's the Best Age to Claim Social Security 62, 66, or 70?

what is the best stage to claim your social security benefits 62 66 70 that is the subject of this video welcome to another episode of the financial fast lane my name is lane martinson and so what you're going to want to do first here is get a copy of your social security statement for both you and or your spouse if you're married if you don't have a copy of the statement you're going to want to go to the ssa.gov website and create an account you should definitely do that both you and your spouse if you're married you're going to be able to access the statement and on there among other things you're going to be able to see and check your earnings history and so you really want to look at that and make sure it looks accurate to you because the social security administration is definitely capable of making some mistakes as well as your employer over the years could have made a mistake in reporting as well so it's really important that you get credit for everything that you've paid into the social security system now they're going to look at your best 35 years to determine your benefit and so if you're earning more now than you have in the past every year you're going to bump off one of the lower earning years so there can be some advantage just making sure you understand that now you have to have at least 10 years of work history to qualify for your own benefit but you don't necessarily have to have any earnings history to qualify for a spousal benefit if your spouse qualifies right so on the social security statement they have some numbers they're going to show you what your pia is that stands for primary insurance amount and that is the dollar amount that is considered to be your full benefit at your full retirement age they will also show you what your benefit would be if you delay until age 70 to claim and they'll also show you what the dollar amount would be if you were to claim at the earliest days possible of 62. something else that is really important to understand is that if you are eligible to receive benefits and you contact the social security administration they are going to be more than happy to turn on or start those benefits and so they are not allowed to provide any kind of planning advice they're just going to answer questions and they are really not in the business of optimizing your benefits you just want to understand that you may be familiar with larry kotlikoff he's a professor from boston university he is widely known as an expert in social security the inter workings when congress needs an expert he is one of the guys they call on to help understand the details he probably understands the interworkings of social security better than about anyone so let's take a look at this quick video clip and see what he has to say on this subject if you look at the social security handbook describing all the provisions for about social security benefits it's uh got 2728 rules and they're written in a language that nobody can understand then there's a set of rules to explain those rules that's called the program operating manual system and that's got maybe a hundred thousand rules to explain the 2728 rules so actually social security is actually more complex than the federal income tax when you look at it carefully it's easy to make big mistakes because it can cost you a hundred thousand two hundred four hundred thousand dollars if you make the wrong mistake as we uh would calculate this as in terms of your lifetime benefits first of all you need to realize social security provides a very good deal for waiting to collect and you you have to plan to live to your maximum age of life because you might so giving up some years of lower benefits to get many more years of higher benefits is worth considering then there's also extra benefits that you can get you can get if you're married or divorce spousal benefits if you're widowed spousal or survivor benefits if you've got a young child children's benefits mother and father benefits so if you're not aware of these benefits you're going to miss out on those and then the third thing is that you have to be careful about taking which benefit when because when you take one benefit too soon you can wipe out the other benefits rather than getting them both so retirement planning is surprisingly complex and confusing and there are literally hundreds of different ways in which you could claim your benefits from a strategic standpoint and so how are you going to get it right and how you're going to figure out you know what is the best option for you your age is certainly a factor your marital status and the age of your spouse your marital history if you've been divorced or not there there's all kinds of rules around collecting benefits from an ex-spouse what's your health situation your longevity for you and or your spouse there are other spousal considerations what other assets do you have for retirement income what is your employment status how many more years do you plan to work are you going to work part-time all of these are really important pieces of information to make a good decision the number of years that you've actually worked what is your tax scenario look like what about your housing and your equity in your home there are strategies associated with social security that can make a really big difference on each of these points what are the survivor benefit needs are there minor children do you have disabilities if you can qualify for a social security disability you could get a larger benefit if you're under your full retirement age and so that may make a lot of sense for many people and then what is the actual need for income how great is the need all of these make up the mix in determining what is the best strategy so just some basic definitions to keep in mind the fra your full retirement age that is the age the social security administration considers to be the age in which you would receive your full benefit and it's going to be based off of your date of birth the the pia the primary insurance amount that is the dollar amount that you would get at your full retirement age and then of course we have the ssa for the social security administration now if you were born between 1943 and 1954 then your fra is age 66 and for every year beyond 54 you add two months to your full retirement age all the way up to age 60. so it looks like this 1943 1954 full retirement age 66 1955 your full retirement age is 66 in two months 66 in four months 66 and six months and so on and then if you were born in 1960 or later your full retirement age would be 67. i think this chart is really helpful to get a visual this is assuming that your full retirement age is 66 if you claim at the earliest days possible 62 you will be taking a 25 reduction in benefits and that's a permanent reduction for the rest of your life if you wait just one more year it's a 20 reduction another year it's only 13 and so forth once you reach full retirement age you would then be eligible to receive your full retirement benefit if you were to delay just one year you're going to get a guaranteed eight percent increase in the benefit another year another guaranteed date and so forth all the way up to age 70. now there is never a any reason to delay past 70 there is no benefit so the latest you would ever want to to claim would be at age 70. here's another visual to kind of put some some dollars to it in this example we're going to assume again you have a full retirement age of 66 and your your benefit in this example being 2 663 so if you went ahead and claimed 62 you'd be getting 1997. which is only 75 percent of the full benefit you wait one year and you can see what that looks like and each year that you wait to claim you can see how that would increase and then at age 66 you get the full benefit a67 you're getting that guaranteed eight percent and then for each year thereafter you can see that really grows nicely we're over four thousand dollars if we if we also include the the cost of living adjustments you know the average it has been which is about 2.8 percent per year and so it's really a really big difference two thousand dollars versus four thousand dollars but of course there's many years of not receiving benefits um when you delay right and so there's so how do you weigh and consider what is the best option also if your full retirement age is 67 instead of 66 that gives you one last year so if you were to claim at 62 it's it's not 25 percent reduction it's a 30 reduction and then you only have three years of the delayed credits so you can't get quite as much you know when you're full retirement age of 67. and so if we look at everyone who's receiving social security benefits today in the united states it's a large majority 74 percent claimed early and so that means only 26 percent are receiving what is considered their full benefit or an increased benefit so let's break this down and look at the claiming trends over time if we go back to 1996 there was about 56 percent of men and 63 percent of women that claimed at age 62 the clear majority but by 2013 it was just 42 percent of men and 48 percent of women claiming 62 and then by 2018 it was 27 and 31 percent so more and more people are recognizing that it is often to their advantage to not claim at the earliest days possible but to claim some time after that now is claiming early the best option for some people sometimes yes it is it's not going to be for everybody because you can leave a lot of money on the table you've really got to consider all these other factors so when we're talking about total lifetime cumulative benefits paid out from social security let's assume a life expectancy of age 85. the green would be delaying and the in the red here we're looking at claiming early so the difference being the total cumulative payout is the difference of 324 thousand dollars so that's a lot of money and that's mostly coming in those last five years so if you live past 80 it's about a 324 000 difference you're getting in those last five years of life so that's it's a lot of money so something to really think about now what if you live to say 95 then it's a huge difference right we're looking about 600 000 more money that you could receive by delaying your benefits over claiming them early so there's a crossover point everyone has a crossover point it's typically going to be around age 80 but if you live past age 80 then there is more benefit money that you could receive and so now again we're just talking about the gross payout because if we're not taking into account taxes here or the other things that could actually decrease your social security benefits and so it could look quite different based on some other factors so you want to keep that in mind now you know the big the terminology that you hear a lot is maximizing your social security benefits how do you maximize and get the most well you know we can look just at the math and we can make some decisions based on what is the maximum amount but what is more important is is having optimized retirement income and that comes through a comprehensive retirement income plan if you think of your social security as kind of one separate thing all by itself and then you think of any other assets that you might have or your home and these other things all separate of each other that's a mistake it's really in the optimizing and the coordinating of all these things including taxes that that really is going to give you the most income sustainable over your retirement will social security be there for you that is a legitimate question and one that weighs heavy on a lot of people's minds because of our huge national debt and deficits we do have an aging population and a shrinking workforce 75 million baby boomers started to retire back in 2011 we are retiring at a rate of about 10 000 people every single day which is an average of 3.6 million people per year and it will continue at that same rate for the next 12 years never before have we had a shrinking workforce and a growing retirement population and so there's there's fewer and fewer people who will be working and contributing into the social security system with more and more pulling on its resources according to social security the trust funds will be depleted without any reforms and so they're able to continue their current trajectory for about 15 years at that point the social security trust fund is empty and then it is estimated that the the new taxes coming in from the workforce would be enough to support about 75 percent of the social security benefits now i don't believe that's going to happen i don't believe the american people are going to allow it to happen and so if you have concern about social security not being there for you i would shift that concern to taxes are likely to be a lot higher in the future and social security is only one of the reasons why that why that's true and so one of the biggest strategies that you want to be aware of is optimizing your retirement income so that you can avoid the taxation on social security it is possible for most people but you got to have a good plan and you got to know what you're doing i have other videos and information where we can we go into some of those details but just that one strategy of avoiding taxation on your social security benefits will add on average about seven years to your retirement income makes a huge difference so again what is the best strategy what is the best age for claiming your social security benefits it's going to be very different for each person i want to make this easy for you we can provide you with a professional social security analysis and strategy report customized for your specific situation it's a comprehensive detailed 20 page report and yet very easy to read summary where you can consider the different strategies and what that may look like in your situation doing this and getting making a good decision here could easily save you thousands of dollars in retirement if you're interested in this it is available for a nominal fee uh there's a direct link in the description below but you can also just go to socialsecuritylane.com and get more information about how to get your own personalized social security strategy analysis if you have interest in that you can click below for more information i hope you found this educational and i look forward to seeing you in the next video

Channel: Lane Martinsen

Views: 779,633

Rating: 4.8865485 out of 5

Keywords: social security, social security benefits, retirement planning, retirement income planning, filing for social security, social security explained, social security retirement benefits explained, social security spousal benefits, social security benefits at 62, social security retirement, social security benefits taxable, social security benefits for spouse, social security benefits explained, social security estimator, social security calculator by age

Id: 2Zax1rDO_w8

Length: 17min 2sec (1022 seconds)

Published: Wed Aug 12 2020

Reddit Comments

[u/kirbyderwood]

The best way to make sure it doesn't run out in 2034 is to vote for people who will protect it.

[u/obtuseCamel]

As a member of generation jones, my experience has been that playgrounds were neglected and high schools were also neglected if not closed after the majority of baby boomers graduated. College got expensive and college loan rules more strict after baby boomers graduated.

Baby Boomers won't escape this but I can see means testing being introduced for social security which means, yes, we'll get screwed.

[u/iugameprof]

I've been hearing the doom and gloom about Soc Sec vanishing since I was in college.

First, it's not going to go away as suggested in the subject line. I seriously doubt that it's even going to drop to 75% in 2035, as I don't see the voters then -- with significantly more in the 55+ age range at that time -- allowing it to happen. Taxes may well go up to make this happen, as the guy in this video says. According to the SSA, raising payroll taxes by 2% (so 1% for employees, 1% for employers) would make the fund solvent for the next 75 years.

Separate from an eventual payroll tax increase, IMO taxes should go up a lot (now, not in a decade or more from now) on the wealthiest among us in terms of individual income, dividend/capital gains income above a high threshold, corporate profits above a threshold, and on accumulated wealth. See, e.g., Warren's ultra-millionaire tax plan. I have absolutely no problem with an additional 2% tax on all net worth over $50M, and 3% over $1 billion in assets, that would raise $2.75 trillion over a decade, benefit society and undo some of the damage of the previous 40 years of historically low taxes on the wealthiest among us.

[u/Ice_Burn]

I retired at 56 last year. I’m definitely taking it at 62. You need to get to around 78 for it to break even and that’s not counting the missed opportunity cost.

[u/weltschmerzerr]

Retired at 60 from the USPS, so I was qualified for the Federal Employment Retirement System supplement, and will start Social Security at 62. I want to enjoy what's left of my active years and carrying mail was putting a lot of stress on my health, i.e shoulder injury. From what I saw delivering mail it was the early retirees enjoying life, traveling, being active, and the truly elderly were holed up in their homes. Realistically, by 75 I'll be slowing down anyway and won't require the extra cost of remaining active.

[u/PeaceImpressive8334]

I made this graphic on the topic in 2019. This was one of my first concerns when I discovered the topic of GenJones a decade ago. I will be providing much more data on my website.

While the "Generation Jones" moniker hasn't caught on in the public just yet, soooo many news articles, like this one in FORBES (Nov. 2020), make it clear that younger Boomers (us) are at a disadvantage compared to older Boomers (which I call The Woodstocks) because of timing. Things are even worse due to COVID.

[u/rswoodr]

I’m retiring this year at 63, since I work in IT and this year has burned me out. Otherwise I’d wait til I’m 65. I got lucky and went corporate in my 40s long enough to get a decent 401k and gave up a big salary to work for the state and get a full pension and a full health plan. But I do not have a lot in common with older boomers, my friends are GenJones or Gen X.

[u/propita106]

If we didn't have to worry about medical benefits, my husband would be retired. I've asked him to minimize his hours--whatever's needed to keep benefits--and we'll tighten our belts.

[u/Old_fart5070]

As a pure gen-x-er I have designed my retirement ignoring completely any SS income. If there will be any, it will be gravy, but with the current administration and the new generation of politicians that have discovered they can buy votes with public money, I won’t hold my breath