Why to Delay Filing for Social Security

Why to Delay Filing for Social Security

Taking one’s benefits the moment one qualifies for them is not necessarily—or even usually—a good idea.

Nearly all Americans first become eligible for their Social Security payments at the age of sixty-two. These benefits, designed to provide for seniors after their retirement, are the culmination of decades of work; for many Americans, there is a strong temptation to take them as quickly as possible and use the extra cash they bring to supplement one’s retirement.

However, taking one’s benefits the moment one qualifies for them is not necessarily—or even usually—a good idea.

Social Security has worked more or less the same since its founding in the 1930s under President Franklin Delano Roosevelt. Throughout one’s life, one pays into Social Security in the form of taxes. When retirement comes and a person reaches “full retirement age,” or FRA, they are eligible to claim a set monthly benefit check – equal to roughly forty percent of their average monthly wage prior to retirement.

For most Americans, this number is either sixty-six and a certain number of months for people born before 1960, or sixty-seven for people born after 1960. However, one does not need to reach FRA age to qualify for benefits; the Social Security Administration has also offered Americans the chance to claim them early, starting at the age of sixty-two.

The problem is that a certain amount is deducted from the monthly benefit for those who claim them early—and the earlier the benefits are claimed, the larger this penalty will be. For Americans claiming their benefits at age sixty-two, this deduction will be worth roughly thirty percent of one’s FRA check.

This is a lot of money to lose. Granted, if one passes away at the age of sixty-three, claiming early benefits will at least have provided them with a little money first. But most people live far longer, and if one claims at sixty-seven (FRA age) rather than sixty-two, the higher benefit starting later will quickly exceed the lower one starting earlier—and then keep going, as a person ages.

On the flip side, it is also possible for people to wait until later than their FRA age to claim benefits, with the opposite incentive: every year a person waits, roughly eight percent is added to the monthly payment. By age seventy, the latest possible age to gain from claiming benefits, the size of one’s monthly check will increase by roughly thirty percent—a bonus that pays for itself in around a decade and a half.

Trevor Filseth is a current and foreign affairs writer for the National Interest.

Image: Reuters