Q & A
Ask Rusty – When Is the Best Time to Claim Social Security?
Dear Rusty: I will be 64 in May of this year, and I’d like to know the best time to claim Social Security. Signed: Anxious to Retire
Dear Anxious: First, please understand that there is no one “best time” to claim your Social Security benefit, because when you should claim depends upon several factors, such as:
- Your current health
- Your life expectancy
- Your immediate financial need
- Whether you are married
- Whether you are still working
When you should claim also depends upon your personal benefit goals. For example, if you wish to maximize your monthly SS benefit amount you can best do that by simply waiting until age 70 to claim. For each full year you delay past your full retirement age (FRA), your SS benefit will grow by 8%, up to age 70 when you get the maximum you’re entitled to. If you are married and die first, that will also provide your widow with a higher benefit as your survivor if your wife’s own benefit is less than yours. But waiting until age 70 to maximize isn’t for everyone.
If you are in poor health and don’t expect to enjoy at least average longevity (about 84 for a man your age now), then claiming earlier would be prudent. But claiming earlier also means a smaller benefit. Your full retirement age (FRA) is when you get 100% of the benefit you’ve earned from a lifetime of working. Your FRA is 66 ½ and if you wait longer than that you will earn Delayed Retirement Credits (DRCs) of .667% for each full month you delay. That means that if you delay until 70, your SS benefit will be 28% more than it would be at your FRA. But if you claim before you have reached your FRA, your benefit amount will be permanently reduced by .556% for each full month earlier than your FRA that you claim. If, for example, you claim your SS to start at age 64, your benefit will be cut by about 17% from what you’d get by waiting until your FRA to claim. And, if you are married, that smaller benefit is what your widow’s survivor benefit would be based upon if you die first.
Anytime SS benefits are claimed before you have reached your full retirement age, you are subject to Social Security’s “earnings test” which, if you are working, limits how much you can earn before SS takes back some of your benefits. For 2021, the annual earnings limit is $18,960 and if that is exceeded, they will take back benefits equal to $1 for every $2 you are over the limit. The earnings test applies until you reach your FRA, after which there is no longer a limit to how much you can earn. In your specific situation, if you were to claim for your benefits to start mid-year (e.g., in May at age 64), you would be subject to a monthly earnings limit of $1,580 for the remaining months of 2021, and if you exceed that monthly limit in any month, you won’t be entitled to any benefits for that month. Then in 2022 you’ll be subject to the annual limit, which isn’t yet published but will be slightly more than the 2021 limit.
Exceeding the earnings limit means that Social Security will make you repay some of your benefits and, unless you make special arrangements to do otherwise, they will withhold future benefits until they recover what you owe. That means going without benefits for some months, and if you have a spouse or other dependent(s) collecting on your record their benefits will also be suspended for that amount of time. So, as you can see there is no one simple answer to your question of when the best time is to claim Social Security. But a careful look at your personal circumstances relative to the above information should help you make that decision.