Social Security by Age of Participant

Published August 6, 2017
Knowing when you’re eligible to receive Social Security impacts your retirement planning. We’ve broken down the three key ages for when you can start.
  • There are three key ages when it comes to claiming Social Security
  • The age at which you start receiving Social Security impacts the size of your benefit

The time at which you apply for Social Security matters. There are three key numbers to know when it comes to claiming Social Security that influence the benefit you receive:

  1. Early Retirement Age (62);
  2. Full Retirement Age (66-67); and
  3. Delayed Retirement Age (70).

Before we break down the pros and cons of collecting benefits at each age, let’s get the definition of Full Retirement Age straightened out. Full Retirement Age, as defined by the Social Security Administration (SSA), “is the age at which a person may first become entitled to full or unreduced retirement benefits.” That is to say, Full Retirement Age isn’t one specific number, it varies slightly depending on the year you were born. For the bulk of Baby Boomers, Full Retirement Age is about 66 years old.

Regardless of when you were born, the age you start collecting benefits as early as age 62, and as late as age 70. So, let’s talk strategy.

You pay for taking Social Security at an early age.

The minimum age to receive Social Security Retirement Benefits is 62. However, individuals who claim Social Security at Early Retirement Age pay dearly for taking their money early. Their retirement benefit can be reduced by as much as 25% relative to someone who waits until Full Retirement Age, according to the SSA. This reduction lasts for the duration of that individual’s life.

This steep reduction has led fewer Americans to claim early. Back in 1985, 57% of men and 62% of women claimed their Social Security benefits at Early Retirement Age. Fast forward to 2013, and those percentages have dropped to 36% and 40%, respectively.

Full Retirement Age means full retirement benefit.

Your Full Retirement Age is somewhere between ages 65 and 67 depending on when you were born. For the bulk of Baby Boomers, Full Retirement Age is about 66 years old. Retirees who wait until Full Retirement Age to claim Social Security are eligible to receive their full retirement benefit for the remainder of their lives. Bear in mind though — a full retirement benefit is not the highest possible retirement benefit. More below.

You are rewarded for delaying your claim.

If you think you might have a long life in retirement – say you’re a non-smoker in good health – waiting to claim Social Security until age 70 may pay off. In the period between Full Retirement Age and 70 retirees collect what’s known as Delayed Retirement Credits – an increase to Social Security income for each month a retiree postpones a benefit claim. In all, the Delayed Retirement Credit can boost income by 8% for each year that an individual waits to claim Social Security after Full Retirement Age, up until age 70.

Optimizing your Social Security benefits is part of foundation laid to making sure you receive your monthly paycheck.

The Three-Legged Stool

The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:

  1. Social Security – This is the government’s retirement plan for us. As long as you’re working (to earn the credits required addressed above) and paying taxes, you’re earning Social Security credits. When you retire, you’ll start receiving monthly Social Security income that will continue for as long as you’re alive.
  2. Pensions – This is the form employer retirement plans used to take. They provided a steady monthly paycheck no matter what happened in the market and no matter how long you lived. Because Social Security only covers, on average, 40% of one’s retirement expenses, people leaned on pensions for the rest. The problem today is that the second leg of the three-legged stool is wobbly or gone. Instead of offering pensions, employers are providing 401(k)s and matching contributions, which helps with the third stool.
  3. Personal Savings – So that you have access to money outside of, and beyond, monthly Social Security and pension checks, you need to save on your own. This money is generally invested differently to serve two purposes. First, money invested in liquid money market or savings accounts provides a cushion and access to extra cash in case of emergency. Second, money beyond that can be invested in the market for a high potential return. This is the money you’re comfortable losing.

How to Supplement Your Social Security

According to the Social Security Administration, individuals aged 65 and over in the top quartile for income (an average of $78,180) received only 18% of their income from Social Security. So where does the remaining 82% come from?

1. Enroll in the Personal Pension

Your Personal Pension is backed by insurance companies which guarantee that for every dollar you contribute, you will receive a certain amount of income every month starting when you retire. Unlike an income annuity, the Personal Pension allows you to contribute incrementally, in smaller amounts and at a younger age, similar to the way you’d put aside money in your savings account or 401(k).

2. Purchasing an income annuity

Similar to the Personal Pension, income annuities provide a guaranteed lifetime stream of income during your retirement. However, instead of contributing over time, you pay a lump sum upfront to purchase your annuity from an insurance company. Then, the insurance company sends you a series of payments for the rest of your life.

How Can I Start a Personal Pension?

A Personal Pension is a contract between you and top rated insurance companies. By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed income available in retirement. Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check.

Here you can see what contributing to a Personal Pension will guarantee you in retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

You can continue with the enrollment process on your own or fill out the information to have one of our specialists follow up with you by starting with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

How Can I Purchase an Income Annuity?

At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.

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From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.

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Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.