Every individual’s journey to claiming Social Security is as unique as a fingerprint, with the optimal age for receiving benefits depending on personal circumstances. Despite studies showcasing the financial benefits of waiting until age 70 to claim, the reality is starkly different. Nearly 9 out of 10 new retirees commence their Social Security before age 70, with over 2 in 10 opting for the earliest possible start at age 62.
This rush to claim early often leads to remorse for many individuals. Surprisingly, the lifeline that could potentially offer solace and a larger benefit goes unnoticed by the majority. According to the Nationwide Retirement Institute, a mere 29% of adults are aware of the option to reverse claiming decisions within a 12-month window.
The Impact of Claiming Age on Social Security Benefits
Your Social Security benefits are intricately tied to both your earnings and the age at which you decide to claim them. An algorithm analyzes your 35 highest-earning years to determine your primary insurance amount (PIA) — the benefit you receive at full retirement age.
Early or delayed retirement adjustments then come into play. Those who opt for Social Security before reaching full retirement age receive a reduced benefit, dipping below 100% of their PIA. In contrast, those who claim after reaching full retirement age secure an increased benefit exceeding 100%.
Two crucial qualifiers frame these rules: eligibility kicking in at age 62 marks the earliest claiming point, while delayed retirement credits cease at 70, making any further waiting counterproductive. Mapping birth year to full retirement age illustrates the percentage of PIA recipients born each year would receive by claiming at 62 versus 70, unveiling the financial delta between the two extremes.
The decisions made around claiming age paint a vivid picture of the impact on payouts. Consider individuals born in 1960 or later — opting for an early claim at 62 fetches a mere 70% of their PIA, while waiting until 70 yields a bountiful 124%. The financial disparity is substantial; for instance, a retiree with an average PIA of $1,984 born in 1962 could witness a staggering $1,071 difference monthly by delaying Social Security.
The Redemption Paths: Social Security’s Do-Over and Suspension Options
Regret is an unwelcome visitor for many retirees who opt for early claims. Luckily, two potential avenues offer a chance at redress, but their existence remains shrouded in mystery for most. With the do-over option, some retirees can nullify their initial claiming choice by submitting Form SSA-521 within a 12-month timeframe post-approval.
Undoing this decision entails a complete repayment of all received benefits, including spousal benefits linked to the worker’s record and Medicare premium withholdings. This reset allows retirees to evade early claiming deductions and accrue delayed retirement credits, significantly amplifying their benefits.
Unfortunately, for those past the 12-month window since approval, the do-over door slams shut. However, an alternative route emerges: the suspension option. Retirees can halt benefit payments post full retirement age to accrue delayed retirement credits, boosting their benefits by 8% annually. Nonetheless, the clock doesn’t rewind; the early claim reductions persist upon reinstating payments, including the suspension of spousal benefits.
To avail this option, retirees can reach out to the Social Security Administration via phone or mail. Additionally, waiting until 70 automatically revives benefit payments. This trifecta of choices remains untapped by many retirees, potentially unlocking substantial financial gains.
