After decades of paying into the
Social Security system, many retirees are eager to start collecting that
monthly check as soon as possible. But that can be a costly mistake.
While you're allowed to start claiming Social Security
benefits at age 62, holding off for several years can add thousands of dollars
to your payments over a lifetime. That's because you don't qualify for all of
your earned benefits until you reach "full retirement age," which is
66 for most Baby Boomers and 67 for those born in 1960 or later.
So checks claimed at age 62 are about 25% smaller than if
you wait until your full retirement age. And if you wait even longer, your
annual benefits will grow by another 8% for each year you wait up to age 70.
For example, let's say 61-year-old Mary, who currently earns
$55,000, is deciding when to retire. If she were to file for Social Security
benefits next year at 62, she would receive around $15,400 a year, according to
T. Rowe Price's Social Security benefits evaluator.
If she waits until 66, however, her annual benefits would grow to around
$20,500 per year. And if she is able to hold off for several more years, until
age 70, her annual benefits would climb to roughly $27,100 per year.
The difference can really add up. If Mary lives to be 95
years old, claiming her benefits at age 70 would result in roughly $677,000 in
cumulative Social Security benefits (in today's dollars), compared to the
$500,000 or so in benefits that she would receive if she'd filed eight years
earlier.Read the whole story from CNN Money here.