When Should Seniors Apply for Social Security?

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Retirement should be a time to relax and enjoy life. Unfortunately, it can be a time of financial insecurity. Regardless of any other retirement income that a senior might depend upon, Social Security provides needed financial assistance for most older people.

Seniors can apply for Social Security before they retire if they continue working beyond the age of 62. People who are still working when they reach full retirement age can continue to work without losing their benefits. Workers who apply before reaching full retirement age may have some of their benefits withheld. Withheld benefits are added to benefits paid after the worker reaches full retirement age.

Although seniors can apply at age 62, that isn’t always a sound choice. The best age at which to apply for Social Security benefits depends upon the senior’s circumstances.

Eligibility

Most individuals qualify for Social Security if they are U.S. citizens or green card holders and have earned 40 “work credits” during their working life. The amount of earnings needed to earn a credit varies each year. In 2021, workers receive one credit for each $1,470 they earn. However, workers earn a maximum of four credits in a year.

Working full-time in a minimum wage or higher job for a total of 10 years will usually qualify an individual for Social Security benefits. Disabled individuals might qualify with fewer work credits.

Individuals who are uncertain whether they qualify for Social Security can open a “my Social Security account” online with the Social Security Administration. The account provides information about the applicant’s work credits and personalized estimates of retirement benefits.

Qualifying for Social Security is not the same as being eligible for Social Security. To be eligible, an applicant must have earned enough work credits to be qualified and must have reached the age of 62. The age limit does not apply if the applicant meets eligibility requirements because of a disability.

Timing

Although an applicant cannot receive benefits until reaching the age of 62, an application can be filed after reaching the age of 61 and 9 months. Whether it makes financial sense to apply at the earliest opportunity depends upon the applicant’s financial circumstances.

Estimates of the percentage of individuals 65 or older who depend on Social Security for nearly all of their income vary. The National Institute for Retirement Security claims that 40% of individuals who have reached the age of 65 derive all of their income from Social Security. Analysts from the Social Security Administration and the Census Bureau have estimated that 12% to 20% of people in that age range receive 90% of their income from Social Security.

Individuals with no other significant source of income may need to apply as soon as they are eligible. Social Security benefits are often modest, but they lift many families out of poverty. Individuals who are still working or drawing benefits from a pension or retirement plan might find it advantageous to wait.

Social Security benefits are reduced by about 30% for individuals who begin to receive them at age 62. To obtain a full benefit, applicants must wait until they reach retirement age. That age is defined as 65 for individuals born in 1937 or earlier. Retirement age gradually increases to 67 for individuals born in 1960 or later. The SSA’s Retirement Age Calculator provides a specific retirement age based on an applicant’s year of birth. 

While “full benefits” are paid upon reaching retirement age, benefits increase when an applicant delays the application. A delay increases benefits by about 8% per year. However, no additional increase occurs after the applicant reaches the age of 70. It never pays to wait beyond age 70 to apply for Social Security.

To Wait or Not to Wait?

The best age at which to apply for benefits is impossible to know. The total amount that an applicant collects during a lifetime will depend on the applicant’s age when the applicant dies. An applicant who plans to wait until age 70 will receive nothing if the applicant dies at age 69. Since none of us know when we will die, the best we can do is base our choice on a balance of need and probability.

In theory, individuals who retire at 62 and individuals who retire at their full retirement age receive the same total amount of benefits if they live an average lifespan. In reality, the SSA hasn’t adjusted their actual assumptions to reflect the average increase in lifespans. One researcher suggests that most seniors will cheat themselves out of money if they apply for benefits at 62. Applying at 70 only appears to be beneficial if the senior lives longer than an expected lifespan.

The average American male who reaches age 65 has a life expectancy of another 18 years Since Social Security is paid for the remaining years of a lifetime, individuals who die at 95 will be rewarded for waiting until age 70 to apply for benefits. Individuals who die at 75 are rewarded for applying at age 65. 

People who can afford to delay might find it wise to bet on a long life. Waiting until 70 can produce a larger benefit that a retiree with a longer than average lifespan will be happy to have. An individual who needs money may want to accept the reduced benefit and apply at age 62. When an individual can afford to wait, it usually makes financial sense to apply no earlier than the applicant’s full retirement age. 

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