When is the best time to start collecting Social Security in the United States? Although the Social Security Administration allows payments to begin at age 62, there are strategies that can help you get higher monthly benefits if you decide to wait. One of the best-known is the so-called “eight-year rule”, which refers to the period between ages 62 and 70, during which your benefits can increase significantly thanks to delayed retirement credits.
During that time, each year you postpone your payments after your full retirement age (between 66 and 67, depending on your birth date), your benefits increase. This strategy is especially useful in long-term financial planning, especially if you are in a married couple, since higher benefits can also better protect your spouse in the future. That’s why choosing when to retire is not just a personal decision, but a key part of your economic security. So, let’s know more about this useful information.
What is the “eight-year rule” of Social Security?
When you are preparing for retirement, one of the most important decisions you can make is when to start collecting Social Security. Although many people in the United States begin to receive their payments at age 62 (which is the minimum age to do so), many financial experts recommend a different strategy: waiting as long as possible, until age 70, to get a higher pension. This is where the so-called “eight-year rule” appears.
Why is it called that?
The “eight-year rule” is not an official name from the government, nor does it appear in Social Security documents. It is a term used by financial advisors to refer to the 8 years between age 62 and age 70, which are the most important for deciding when to start collecting your retirement benefits. During these 8 years, you can choose to either start early (at 62) and receive less money each month or to wait until 70 and receive much more money each month.
How does this affect the money you receive?
Social Security gives you some flexibility to choose when to begin receiving your payments. But what you need to know is that the longer you wait (up to age 70), the more your monthly payments increase.
This increase happens thanks to something called “delayed retirement credits.” For each year you decide to wait after your full retirement age (which is between 66 and 67 years old, depending on your birth year), your monthly payment goes up by about 8%.
But if you choose to start collecting before your full retirement age, for example at 62, your payments can be permanently reduced by up to 30%. That means you’ll get less money every month for the rest of your life.
Example to understand it better
Imagine you’re supposed to receive a pension of $2,000 per month if you retire at your full retirement age (for example, 67 years old):
- If you decide to start collecting at age 62, your monthly payments could go down to about $1,400.
- But if you wait until age 70, your payments could go up to about $2,480 per month.
That difference of more than $1,000 per month may seem small at first, but if you live 20 years after retiring, you could receive more than $250,000 extra in total for having waited.
When does it make sense to follow this strategy?
This “eight-year rule” is not for everyone, but it can be a great decision in certain cases. For example:
- If you are in good health.
- If you have family members who have lived many years (good life expectancy).
- If you have other income or savings that allow you to wait.
- If you are married and want to protect your partner with a higher monthly payment in case one of you passes away, since survivor benefits are based on what the deceased person was receiving.
In these cases, waiting can make a lot of financial sense, because the higher payment will stay with you for life.
But it’s not always possible to wait
Not everyone can afford to wait until age 70. There are many reasons why someone might need to start collecting earlier:
- They lost their job and need the money now.
- They have health problems and don’t know if they’ll live many more years.
- They don’t have enough savings to cover their expenses if they don’t collect.
- They want to retire young and enjoy life while they still have energy.
- These are also valid reasons, and many people prefer to collect earlier and get less.
The important thing is to understand that if you collect early, you will receive less money each month, and that can’t be changed later. It is a permanent decision. So, plan your retirement in advance if you have the possibility because it will be much easier to decide the time you will retire. Has this information changed your retirement idea?