Should I wait until full retirement to claim my benefits? 

That depends on your life goals and circumstances. According to the Social Security Administration, you’ll need to determine your full retirement age (FRA) before you can begin strategizing when to claim benefits. If you were born in 1960 or later, your FRA is 67. If you were born before 1960, your FRA falls between 65 and 66. Although you can start claiming Social Security benefits as early as age 62, you will not receive full monthly benefits unless you wait until your FRA to claim them. For example, if your full retirement age is 67, you’ll receive approximately 70% of your full benefit if you start receiving Social Security at age 62. Each month you start receiving benefits before your full retirement age, your benefits are reduced by 0.5 percent on average.

This means if a person decides to claim benefits several years prior to their full retirement age, they could potentially lose thousands of dollars in the long term. However, if you delay Social Security benefits past your FRA, your benefits will increase by 8 percent each year until age 70. For example, if your FRA is 67 and you wait until 70 to claim Social Security benefits, your monthly benefit amount could increase by 24 percent. Retirees often are tempted to claim their benefits early and reinvest them; however, the investments may not generate returns large enough to compete with the guaranteed 8 percent annual growth in delaying Social Security benefits.

Did benefits increase at the end of 2023 and how does that affect beneficiaries?

Yes, Americans did see an increase of 3.2% in 2024. This is the annual cost-of-living adjustment (COLA). This increase began for Social Security beneficiaries in January 2024. By law, federal benefits increase when the cost of living rises, as measured by the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers. Unfortunately due to inflation, this increase will most likely help beneficiaries minimally break even with their finances.

Should I claim my benefits early? 

As a result of these rules, it may seem like the easy choice is to delay retirement benefits, but doing so is not realistic for everyone. Health and longevity are critical factors in determining how much money each person needs in retirement.

If you develop cancer or need to treat a chronic health condition, and your life expectancy is less than average, it may be wise to claim social security benefits earlier than your full retirement age. On the other hand, if you want to delay your Social Security benefits but do not have sufficient sources of income, you may consider tapping into retirement accounts, such as 401(k) plans and IRAs or purchasing a cash-value life insurance product, to help fulfill those income needs before claiming social security benefits.

Should I consider my spouse’s Social Security?

If you have a spouse or partner, consider your spouse’s Social Security benefits into your financial retirement planning strategy. You may decide that the lower-earning spouse will claim benefits at full retirement age for cash flow and liquidity reasons, while the higher-earning spouse’s benefits grow until age 70.

Get Professional Support & Advice

Contact OFS Financial Services to see how Financial Advisor, Jason Andrew can help you optimize your Social Security benefits today.

Sources:

https://www.pacificlife.com/insights-articles/deciding-when-to-claim-retirement-benefits.html

https://www.ssa.gov/prepare/plan-retirement

SSA.gov, May 6, 2024, “Strong Economy, Low Unemployment, and Higher Job and Wage Growth Extend Social Security Trust Funds to 2035”

CNBC.com, May 19, 2024, “Social Security’s ‘biggest myth’ leads people to claim early, expert says. Even a slight delay can boost retirement income”