Delaying Social Security

Before collecting Social Security, it's important to understand the long-term advantages offered by delaying receiving benefits. That's because the longer collecting benefits is delayed, the larger the monthly check received.

In this article, we're going to talk about the pros and cons of delaying Social Security payments.  That will include a discussion of how the level of benefits received will change over time, as well as factors individuals need to consider before making a decision to collect benefits.  Finally, we'll point out an online tool that can help everyone to make a more informed decision.

Social Security Benefits

The U.S. government is a large and sophisticated organization.  The Social Security Administration is charged with a very important duty:  to supply a steady stream of retirement income to Americans.  But as those same Americans approach 62 years of age, they're faced with a very important decision.  Should they start receiving monthly Social Security benefits?

Qualifying for Social Security

To qualify for retirement benefits under the Social Security program, individuals must earn 40 credits over their working lifetime.  There are exceptions to this requirement under disability and survivor benefits, but under normal circumstances, 40 credits are needed to earn benefits.

Up to four credits can be earned each year; and since it only takes about $4,200 in income to earn these credits, it's common for individuals to earn all four credits each year worked.

Collecting Social Security Benefits

Qualifying individuals are eligible to start receiving their Social Security retirement benefits when they reach the age of 62.  However, at age 62, these are referred to as "early" benefits. These early benefits are reduced from what the system considers full benefits.

Full, or Normal retirement age under the Social Security program used to be 65, but a law passed back in 1983 modified the system such that only those persons born in 1937 and earlier were eligible for full benefits at age 65.

The table below provides a listing of "normal" retirement age for individuals born between the years of 1938 and 1959.  Individuals that were born after the year 1960 need to reach the age of 67 before qualifying for full benefits.

Full / Normal Social Security Age

Year of Birth Normal Retirement
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months

Anyone can also choose to delay receiving Social Security retirement benefits past the full or normal retirement age, which is referred to as "delayed" benefits.  By delaying benefits, the participant will receive higher monthly payments.

Pros and Cons of Delayed or Early Benefits

As mentioned earlier, receiving benefits before full retirement age, results in reduced payments, while delaying benefits results in increased payments.  The table below illustrates the impact of this decision for anyone born after 1959:

Social Security Benefits
Age Benefits Paid
62 70.0%
63 75.0%
64 80.0%
65 86.7%
66 93.3%
67 100.0%
68 108.0%
69 116.0%
70 124.0%

This example demonstrates that individuals required to reach age 67 to receive full Social Security retirement benefits, would receive only 70% of their full benefits if they started collecting money at age 62.  Conversely, if this individual were to delay taking payments until age 70, then they would receive 124% of their full benefits.

The reason the Social Security Administration needs to reduce benefits for early collectors, and is willing to increase payments to those delaying receipt of benefits, is quite simple:

The age at which anyone starts collecting money will determine the total number of years they'll receive benefits.  Starting early means that they'll collect money for a longer period of time, while delaying benefits means they'll receive income for fewer years.

Deciding When to Collect Benefits

Deciding when to start the collection of Social Security retirement benefits is a personal matter.  Before making this decision, the following factors should be considered:

  • Work Status:  If an individual is still working, then there are earning limits that apply between the age of 62 and full retirement age.  People earning too much will need to give up some of their benefits.  These limits no longer apply once normal retirement age is reached.
  • Longevity:  At age 65, a man can expect to live to around 83 years of age, and a woman age 65 can expect to live until nearly 85 years of age.  If family members tend to be long-lived, then it might be a good idea to delay receiving benefits.
  • Health:  Anyone that is not in good health for some reason may want to start collecting benefits earlier.
  • Financial Wellbeing:  Individuals thinking about delaying Social Security will need to have sufficient income from other sources.  This can include a working spouse, retirement plan such as a 401(k), traditional pension, or savings account.

Online Benefits Calculators

Our online Social Security benefits calculator can help individuals to determine the future value of their benefits.  This calculator is best used along with a Social Security Statement.  Alternatively, the information can be obtained directly from the Social Security website prior to using this tool.

By examining early, normal, and delayed benefits, this tool can calculate the monetary advantages and disadvantages of receiving delayed versus early benefits.


About the Author - Delaying Social Security (Last Reviewed on October 19, 2016)