One of the many considerations when approaching retirement is the age at which you start collecting Social Security benefits. Age 63 is a common consideration because it’s before the full retirement age for many, yet after the earliest eligible age of 62. Understanding how claiming at age 63 impacts your benefits can greatly influence your retirement planning.
Understanding Full Retirement Age (FRA)
Your Full Retirement Age (FRA) is determined by the year of your birth. For individuals born between 1943 and 1954, the FRA is 66. If you were born after this range, the FRA increases gradually until it reaches age 67 for those born in 1960 or later. Claiming before your FRA results in a reduction in monthly benefits.
Benefits Reduction at Age 63
- Percentage Reduction: Claiming Social Security at age 63 means you’ll be doing so 3 years before your FRA if you were born between 1943 and 1954. This results in a benefit reduction of about 20% for the rest of your life.
- Monthly Impact: To put it into perspective, if your full benefit (the amount you’d get at FRA) is $1,000 a month, claiming at 63 might reduce that to approximately $800 a month.
Factors Affecting Your Social Security Benefits
Several elements determine your benefit amount:
- Earnings Record: Social Security calculates your benefits based on your 35 highest-earning years in the workforce. If you’ve worked fewer than 35 years, zero-earning years are factored in, potentially reducing your benefit.
- Cost of Living Adjustments (COLA): Benefits usually rise annually based on the cost of living. However, the age at which you claim doesn’t impact COLAs.
Should You Claim Social Security at Age 63?
It’s a personal decision, but here are some considerations:
- Financial Need: If you require the income immediately, claiming earlier might be necessary.
- Health Considerations: If your health or family history suggests a shorter life expectancy, claiming earlier might make sense.
- Employment Status: If you’re still working, your benefits might be temporarily reduced if you exceed the earning limits set by Social Security.
- Maximizing Lifetime Benefits: If you’re in good health and have other income sources, waiting until FRA or even age 70 can significantly increase your lifetime benefits.
Claiming Social Security at age 63 comes with a permanent reduction in monthly benefits, but it might be the right decision based on individual circumstances. As with all retirement planning decisions, it’s essential to weigh the pros and cons and consider consulting a financial advisor.