The Motley Fool website has an interesting article about how many Americans are choosing to receive their social security benefits at age 62 rather than waiting at least a few more years and receiving more money. Every American worker has a Full Retirement Age (FRA), which is determined based on the year they are born, when they can receive full benefits. For example, the FRA for someone born after 1962 is 67. From there, the Department of Social Security looks at the 35 years of work during which the individual paid the most into social security to make a determination of how much income the person will receive.
As the article points out, very few workers wait until their FRA to start receive social security payments. In fact, only roughly four percent of women wait until their FRA and two percent of men.
Immediate need
One reason why people choose not to wait until their FRA is that they need their social security money immediately. If someone loses their job in their early 60’s, for example, they are likely to have trouble finding a new one because of their advanced age, and their best option is to retire a little early and start getting social security. Essentially, they know that they would get more money if they waited, but they feel that they can’t wait.
Life expectancy and other factors
If you retire before your FRA and live for many years after that, you can get more social security money than if you wait. Conversely, if you retire at 70 and then die at 71, you haven’t gotten much from the government even though you receive almost 25% more monthly than if you had retired at 62. The point is, the best time to retire depends on the individual’s health and how long the expect to live.
Furthermore, the decision about when to receive social security depends on the individual’s attitude towards retirement. Some people want to get out of the workforce as early as possible in order to enjoy their golden years, but others want to work as long as possible even thought they don’t need to because they enjoy it. Another big factor is how much income the individual retiree will be receiving from other sources. In short, the decision about when to start receiving benefits is a complex one that varies widely.
Dil Bole Oberoi
