When Do I Become Eligible for Social Security

Full retirement age for people born between 1943 and 1954 is 66.  This is the age at which you may begin receiving your full, unreduced PIA (primary insurance amount).  Early eligibility begins at age 62.  If you apply at this age, your benefit will be reduced.  The age at which you apply for Social Security benefits has a tremendous impact on your monthly income and the total amount of benefits you stand to receive over your lifetime.  This is one of the most crucial aspects of Social Security Planning. 

The biggest question facing baby boomers today is, "When should I apply for Social Security?"  This answer depends on your situation and your retirement plans.  If you're not working and few resources, then you may have no choice but to take Social Security early.  If you are still working in your primary occupation, it probably doesn't make sense to apply for early benefits because some or all of your benefits will be withheld.

The when-to-apply question should really be considered in the context of your overall financial plan – which strategy will give you the highest income later on and when you are likely to need it most.

Peter Madine - Financial Consultation
  What if you apply between the ages of 62 and 65?

If you apply for Social Security when you first become eligible at age 62, your benefit will equal 75% of your PIA.  So if Boomer Bill, whose PIA is $2,466, applied in 2012 when he turned 62, his monthly benefit would be 75% of his PIA, or $1,849.50.  This is the amount that he would receive for the rest of his life, increased only by annual COLA's (cost of living adjustments).

The reduction for early benefits is called the actuarial reduction and is based on average life expectancies.  Whether people receive the lower amount starting at age 62, or the higher amount starting at age 66, the effect on the system is the same.  However, the effect on you will depend on how long you actually live.  If you take reduced benefits at age 62, you will receive a lower monthly benefit for life.  If you live longer than average, you will receive less in total benefits if you'd waited until full retirement age (66) or even later to apply.

What if you apply between the ages of 66 and 70?

At age 66, you attain full retirement age.  Now you can start receiving your full, unreduced primary insurance amount.

If you delay the onset of benefits past age 66, you will earn delayed credits.  For each year you delay the start of benefits, your benefit will increase by 8% per year up to age 70, after which no further credits may be earned.  So if Boomer Bill waits until age 70 to apply, his $2,466 PIA will be increased by 32% to age 70 to apply, his $2,466 PIA will be increased by 32% to $3,255 (not including annual COLAs).

At the time of application, your delayed credits are calculated on a monthly basis.  So you can apply anytime between your 66th and 70th birthdays and receive a prorated credit for the delay.  Applying at age 70 earns you the most credit and results in the highest benefit.