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96% of Americans make this mistake – The Motley Fool

"Wrong, I've done a few" goes the old Frank Sinatra standard, and we've all made many of them. However, some errors can be quite costly and best avoided if possible. For example, it is best to avoid making mistakes with your insurance so that you do not end up collecting less money from the program than you are entitled to.

Unfortunately, 96% of Americans seem to make a meaningful mistake about Social Security – by starting to collect their benefits too soon.

  We see the foot of a man in wingtip shoes about to tread on a banana peel.

Image Source: Getty Images.

When People Start Gathering Social Security

One of the first things you need to know to make smart social security decisions is your "full retirement age." This is the age where you can begin to collect your full social security benefits. It is somewhere between 65 and 67, depending on when you were born:

Year of birth

Full retirement age

1943 to 1954



66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later


Data source: Social Security Administration.

Then you know that you can start to collect your benefits as early as the age of 62 and as late as the age of 70. For each year beyond the full retirement age that you defer to begin receiving benefits, you increase the value of your benefits by approximately 8% – until you reach age 70, when this waiting bonus bonus maximizes. So delaying from 67 to 70 years can make the benefits check about 24% fatter.

Starting to collect earlier than full retirement age will reduce your checks. If your full retirement age is 67 and you start accumulating benefits at the age of 62, they will be 30% less than if you were expecting FRA.

So when do people generally start collecting their Social Security benefits? Check the table below:


Percentage beginning to collect benefits







65 [19659030] 10.3%







Data source : Social Security Administration.

One third of people start gathering as soon as they can, with very few waiting until the last year or two. Only 3.7% start collecting at the age of 70, which means that 96.3% started before then. There are good reasons to start early, but many experts agree that the best age to start collecting is 70 years old. That means a heck of a lot of retirees make a mistake.

Let's take a look at why you might start collecting early – or late.

Why start collecting social security early?

There are solid reasons to start collecting early. For example, you may simply need it. Many end up retiring earlier than planned due to loss of work or setbacks in health. If that happens to you, you may need that income as soon as possible.

On the other hand, you may have saved aggressively for a long time and planned to retire early. In that case, the income from the insurance together with your savings may be enough to support your early retirement. This makes particular sense if you expect to live a shorter life than average, perhaps because the family tends not to live that long or if you are in poor health.

Another consideration is this: It is a sink, in many ways. The system is designed so that for those who live an average length, it doesn't matter when you start collecting. Throughout your life you will get about the same overall benefits.

  We see two candles on a birthday cake - spell number 70.

Image source: Getty Images.

Why start collecting Social Security at 70?

Why would 70 years be a better age to start collecting benefits? There are a handful of good reasons, including:

  • You are still working: If you are still working at the age of 62 and for some years after that – maybe because your retirement egg is small and you need to keep working – It makes a lot of sense to postpone starting to collect insurance. If you collect them while you work, you may be taxed on this income, and some of it can also be withheld (even if you get your money back later in the form of proportionately extended checks).
  • You can afford to wait: If you are wealthy or just have enough income that you do not need income from the insurance to start at a certain time, you may want to postpone as your check amount grows. One strategy that may help you retire a little earlier while still delaying the beginning of collecting is if you take more money from the other retirement accounts (such as IRAs and / or 401 (k) s) in the 60s, such as that you can delay the beginning of Social Security.
  • You plan to live a long time: Obviously, if you have many 90-something relatives and you have a good chance of living a long life, it will be better to collect extra fat checks throughout the extra long pension.
  • You have no idea how long you will live: Most of us really have no idea how long we will live. According to the Social Security Administration, one in three of today's 65-year-olds will live over 90 years, while one in seven will live over 95 years. These people are looking at retirees longer than 25 or 30 years, which is a long time to support yourself.
  • You are coordinating with a spouse: Waiting until the age of 70 to claim can be a smart move if you are married and have earned more than your spouse in working life. . That means your checks are likely to be larger than your spouse's, and if you delay collecting yours for 70 years, you can maximize your collective benefits. If you two need some income sooner, you may start to collect the spouse's benefits first. An added benefit is that when one of you dies, the survivor will retrieve the largest of the benefit checks and maximize the income.

If these reasons are not enough, here are some more, via a report from United Revenue entitled The pension solution is hiding in plain sight. The researchers used data from the University of Michigan's Health and Retirement Study to run many fortunes and income simulations of about 2,000 households to identify the best age to claim social security benefits. They arrived at the age of 70 and also offered these findings:

  • "The average beneficiary would receive 9% more retirement income if they made the financially optimal decision about when to claim [Social Security benefits]."
  • "On average, if all retired households were to have opted for the optimal age, they would have had … $ 110,546 per household … or an average of $ 3,400 a year in extra income."
  • "Most retirees will lose wealth in the 60s and early 70s if they choose to optimize social security, but will be richer in the late 70s throughout the rest of their lives. "
  • " Elderly poverty could be cut by almost 50% if all retirees claimed social security at the financially optimal time. "Even fewer would end up in poverty" if they earned extra income while waiting to demand social security. "

It may not sound enticing on Social Security, but the more you know, they miss the decisions you want to make, which can lead to increased social security benefits and many thousands more in retirement.

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