The average working American is planning to retire some time around the age of 66. This is right between the average age where Americans can begin to collect on their Social Security that they’ve been contributing to over the years. Depending on when you were born, you can begin collecting at either 65 or 67.
So what is the best age to retire? What many Americans don’t realize is that they can actually delay receiving benefits past their full retirement age. When this happens, they can have a bigger overall monthly check from the Social Security program. If you are planning to work during your retirement, even part time, then it might be financially wise to delay receiving benefits so that you don’t affect the amount received in a negative way.
Should You Retire At the Age of 62?
Some folks are opting for an early retirement at the age of 62. This is because they can receive a reduced level of benefits from Social Security. Although this isn’t for everyone, it could be the right decision for you if you can meet the following criteria.
- You have a substantial retirement amount that has already been saved.
- You have an income ladder that has been installed for each year of your retirement.
- You have investment income from dividends, interest payments, or other sources that can pay your monthly expenses.
The amount of benefit reduction is quite high. For someone who has a retirement age of 67 for their Social Security benefits, the total amount is reduced by 30% if they retire at 62 and begin collecting. Every additional year you wait beyond 62 to collect Social Security will reduce the penalty by about 5%.
The same is also true. If your retirement age is 67 and you wait until the age of 68 to collect benefits, then you’ll receive about 105% of your anticipated benefit instead. Waiting until the age of 70 would mean your benefit check would be about 115% of the published amount.
Why Are These Amounts Variable?
Your Social Security benefit amounts are variable because there is a set benefit amount that you will receive. If you wait until later to collect the benefit, then you’ll be able to take higher payment amounts because the payments are spread out over a smaller amount of time. On the other hand, earlier retirements require the payments to be spread out over a larger window, which means you’ll have to take smaller payments to make the benefit last longer.
The best age to retire really depends on how much money you’ve saved and invested and how much cash you need every year to live on after you’ve retired. Determine how much you’ll need, build your investment portfolios so that they’ll be able to pay you what you need, and then you’ll be able to retire at the age that suits you best.