New Report Shows Fewer Retirees Claiming Social Security Benefits at Age 62

By Jeffrey Levine, IRA Technical Expert
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Deciding the best time to claim your Social Security benefits is an intensely personal decision that can have a truly significant impact on your overall retirement security. In general, you can begin collecting reduced retirement benefits as early as age 62. Alternatively, if you wait to collect benefits beyond what’s known as your Full Retirement Age (FRA), you can earn 8% annual increases, known as delayed credits (on top of any cost-of-living adjustments to which you would otherwise be entitled) until you turn age 70. When determining when you should begin to collect Social Security benefits, it’s essential to consider many different factors, including your:

  • Health
  • Marital status
  • Tax bracket
  • Expected rate of return on your other assets
  • Anticipated Social Security benefit, along with that of your spouse, if applicable
  • Family history of longevity (or lack thereof)

Obviously, your personal set of facts and circumstances is going to be different from that of just about anyone else, and for that reason, it’s hard to make general recommendations when it comes to claiming Social Security benefits. That said, the vast majority of Social Security experts have long believed that far too many people claim benefits before the optimal age to do so.

Thankfully, according to a new report that was just released by the Center for Retirement Research at Boston College, it seems as though this cautionary message may be permeating into the minds and retirement plans of Baby Boomers. According to the report, Trends in Social Security Claiming, during the mid-1990’s, roughly 56% of men claimed their Social Security benefits when they turned 62. In comparison, the report indicates that today, only about 36% of men turning 62 claim Social Security benefits at that time. So while more than one-third of those eligible to claim at 62 are still doing so, the trend is clearly moving towards waiting longer.

So is waiting beyond 62 right for you? Maybe, maybe not. As stated above, there are many factors that must be considered. Whatever your ultimate decision, however, you should always make sure it considers the tax-efficiency Social Security benefits provide relative to other types of income. For instance, in general, for every dollar you withdraw from your IRA in retirement, you must add one dollar of income to your tax return. The same is not true when it comes to your Social Security benefits.

If you have fairly modest retirement income, you may not have to pay tax on any of your Social Security benefits. If your income is more substantial, then you may have to pay income tax on a portion of your Social Security benefits. Under no circumstances, however, will you have to pay income tax on more than 85 cents of each Social Security benefit dollar your receive. Put differently, at least 15% (and possible much more) of your Social Security benefits will always be tax free. From an income tax perspective alone, that’s a pretty good deal!

More on Social Security Benefits and IRAs from The Slott Report:

When is Tax Free NOT Tax Free?
IRAs and Social Security: Fact or Fiction?
Social Security as a Cheap Annuity Option (Part 1 of 2)


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