Social Security Calculator
The U.S. Social Security website provides calculators for various purposes. While they are all useful, there currently isn't a way to help determine the ideal (financially-speaking) age at which a person between the ages of 62-70 (required age range) should apply for their Social Security retirement benefits.
Determine the Ideal Application Age
Use the following calculation to determine the ideal age to apply for SS retirement benefits based on age, life expectancy, and average investment performance. Click here to estimate life expectancy.
Compare Two Application Ages
Use the following calculation to compare the financial difference between two Social Security retirement benefit application ages. The U.S. Social Security website provides estimated benefit payment amounts of different claim ages.
Social Security (SS), which was first established in 1935 by the Social Security Act in U.S., provides monetary assistance to Americans with inadequate or no income. The welfare program is mainly based on employee/employer contributions that are withheld from paychecks in the form of payroll taxes. These funds are pooled together and distributed to people who qualify for distributions. Americans past the age of 62 or older aren't the only people who may qualify; people who are disabled, or surviving spouses/kids may also apply successfully for distributions.
When to Apply for Social Security
A person can apply for retirement benefits as early as age 62, or as late as 70. While it's possible to claim the benefits as soon as they become available upon turning 62 years old, 70 is the age at which the maximum benefit can be achieved. Regardless, the age at which anyone can start receiving SS benefits in retirement depends on the year they were born; this is known as the full retirement age (FRA).
There are multiple factors that should be considered when determining the ideal age to apply for SS.
- The immediate need for cash
- Life expectancy
- Current earned income
- Marital status
- Relative age, income and health of spouse
Given these factors, each individual needs to evaluate their unique situations to determine the ideal age to apply for benefits. A 62-year-old with no income that is struggling to make ends meet could opt to claim SS. In addition, if they don't expect to live long, receiving benefits sooner rather than later should provide more income before death. A marriage in which one was the high-earner but their spouse, who is expected to live longer, didn't earn as much in their working years may want to hold off on applying until as late as possible. Not all people can wait until age 70 for maximum benefits because of the factors discussed above or other reasons. For those who prefer taking an active role in investing and/or are optimistic about potential investment opportunities that could outweigh the 25% reduction in monthly benefits that can result from not waiting until FRA, SS benefits can be claimed early at age 621. However, in general, people with adequate amounts in their savings who are in good health may find it more financially desirable to apply for benefits later in life (just not past the age of 70).
SS benefits increase slightly from year-to-year as a result of the cost-of-living adjustment (COLA), a measure applied in order to account for inflation. COLA's purpose is to ensure that the purchasing power of SS and Supplemental Security Income (SSI) is equivalent to previous years, even as inflation steadily rises. COLA's calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the last year a COLA was determined, to the third quarter of the current year. If there is no increase from year-to-year, there is no COLA.
1. "Should you take Social Security at 62?" Fidelity May 08, 2017. www.fidelity.com/viewpoints/retirement/social-security-at-62.