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http://blogs.marketwatch.com/encore/2013/10/23/social-securitys-real-retirement-age-is-70/
Social Security’s retirement age is 70. The simple fact is that monthly benefits are highest at age 70 and are reduced actuarially for each year they are claimed before age 70. This is a relatively new development, which may explain why Social Security’s retirement age is the best-kept secret in town. But I think it’s time we told folks. And then we need to clarify what all this talk about raising the so-called full retirement age really means. (These issues are covered in more detail in a new issue brief from the Center for Retirement Research.)
Currently workers can claim their benefits at any time between 62 and 70. But benefits claimed before age 70 are actuarially reduced. That is, benefits claimed at younger ages are lower by an amount that compensates for the fact that they start earlier and will be paid for more years. The goal is to ensure that, based on average life expectancy, people who take a lower benefit early would expect to receive about the same total amount in benefits over their lifetimes as those who wait for higher monthly benefits but start receiving them later. In other words, the claiming age affects monthly benefits but, on average, does not alter total benefits paid over the lifetime.
So, we have a benefit structure that pays full benefits at an age when most people have stopped working. We have set that age at 70. If you claim after 70, lifetime benefits decline, because monthly benefits are not increased for claiming after 70. If you claim before 70, your monthly benefit is significantly lower.
Most people don’t understand how much claiming early reduces monthly benefits. As the example in the table above shows, claiming at 62 instead of 70 cuts the monthly benefit almost in half, from $1,000 to $568. Given that Social Security is a particularly valuable type of income – inflation-adjusted and lasting for as long as you live – it generally makes sense to postpone claiming as long as possible to get the highest monthly amount, assuming you are in good health for your age.
COMMENTARY PROVIDES ALTERNATE VIEWS...A CONTROVERSY WORTHY OF YOUR ATTENTION
Social Security’s retirement age is 70. The simple fact is that monthly benefits are highest at age 70 and are reduced actuarially for each year they are claimed before age 70. This is a relatively new development, which may explain why Social Security’s retirement age is the best-kept secret in town. But I think it’s time we told folks. And then we need to clarify what all this talk about raising the so-called full retirement age really means. (These issues are covered in more detail in a new issue brief from the Center for Retirement Research.)
Currently workers can claim their benefits at any time between 62 and 70. But benefits claimed before age 70 are actuarially reduced. That is, benefits claimed at younger ages are lower by an amount that compensates for the fact that they start earlier and will be paid for more years. The goal is to ensure that, based on average life expectancy, people who take a lower benefit early would expect to receive about the same total amount in benefits over their lifetimes as those who wait for higher monthly benefits but start receiving them later. In other words, the claiming age affects monthly benefits but, on average, does not alter total benefits paid over the lifetime.
So, we have a benefit structure that pays full benefits at an age when most people have stopped working. We have set that age at 70. If you claim after 70, lifetime benefits decline, because monthly benefits are not increased for claiming after 70. If you claim before 70, your monthly benefit is significantly lower.
Most people don’t understand how much claiming early reduces monthly benefits. As the example in the table above shows, claiming at 62 instead of 70 cuts the monthly benefit almost in half, from $1,000 to $568. Given that Social Security is a particularly valuable type of income – inflation-adjusted and lasting for as long as you live – it generally makes sense to postpone claiming as long as possible to get the highest monthly amount, assuming you are in good health for your age.
COMMENTARY PROVIDES ALTERNATE VIEWS...A CONTROVERSY WORTHY OF YOUR ATTENTION
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