Plan on Claiming Social Security at 65? You Might Be Leaving Money on the Table

It’s a good thing that Social Security gives seniors choices as to when to claim benefits — at least in theory. But in reality, that puts a lot of pressure on retirees.

You can sign up for Social Security as early as age 62. However, if you don’t want your monthly benefits reduced, then you’ll need to wait until full retirement age (FRA) to sign up for them. FRA is 67 for any person born in 1960 or later.

You can also delay Social Security past FRA for larger monthly benefits. For each year you opt to hold off, you get an 8% boost. However, your benefits won’t increase beyond the age of 70, so there’s no sense in delaying Social Security beyond that point.

Some people choose to file for Social Security at age 65 because that’s when Medicare eligibility begins. That’s not necessarily a poor choice off the bat. But you should know that if you claim Social Security at 65, you may end up leaving money on the table.

The problem with claiming Social Security at 65

Claiming Social Security at 65 means filing two years prior to FRA if you were born in 1960 or later. That means you could be looking at a permanent 13.34% reduction in your monthly benefits, more or less.

That’s not necessarily a problem if you have a lot of retirement savings, or access to a generous pension or other income. But if you expect Social Security to be your main source of retirement income, then accepting a lower monthly benefit for life is something you may not want to do — not when you could wait two more years and enjoy your complete benefits without a reduction.

Of course, claiming Social Security at 65 won’t slash your benefits to the same extreme as filing at 62. If you’ve worked hard your whole life and want to retire early, it may be more reasonable to push yourself to wait until 65 than to wait until 67.

But if you’re going to claim Social Security at 65, understand that you won’t be getting your monthly benefits in full. And if your savings start to run out on you, smaller benefits could become a problem later on in retirement.

You don’t have to claim Social Security to get onto Medicare

One reason you may be inspired to sign up for Social Security at 65 is that you’re intending to enroll in Medicare at that time. But you should know that you do not need to be on Social Security to get Medicare. Even though you can sign up for both programs in the same place — on the Social Security Administration’s website — you can enroll in each one independently.

One thing you should know is that if you’re getting Social Security and Medicare at the same time, your Medicare Part B premiums will get paid out of your Social Security benefits. But if you’re not getting those benefits yet, you can simply pay your Medicare premiums on your own.

To put it another way, you shouldn’t sign up for Social Security at 65 simply to make the process of paying for Medicare coverage easier. It’s not worth reducing your benefits permanently to get out of writing a monthly check. And you can also automate your Medicare premium payments out of a bank account to make life simpler.