Choosing a Social Security filing age isn’t easy. There are different factors you’ll need to weigh as you arrive at that decision, such as what your retirement savings look like and how long you expect to live (not that you can predict that, but you can give it your best guess based on your family history and health).
It’s not uncommon to arrive at a filing age well ahead of retirement and use it to shape your plans. But a lot of people’s plans may now be changing due to the impact of the pandemic.
In a recent Nationwide survey, 19% of people say they’re planning to alter their Social Security filing plans in light of the events of the past year. For 9% of survey respondents, that means filing for benefits earlier than expected, but for 11% of respondents, it means delaying benefits.
The question is: Should you alter your filing plans, too?
You may want to file earlier than planned
Millions of Americans have lost their jobs in the course of the pandemic, and that extends to older workers who may have only planned to spend a few more years in the labor force. If you’ve lost your job and don’t have enough money between savings and unemployment benefits to cover your expenses, then you may have no choice but to file for Social Security sooner than expected. In fact, doing so is preferable to racking up debt, even though claiming benefits ahead of full retirement age means reducing them on a permanent basis.
Furthermore, if you’re out of work voluntarily right now due to health concerns, there may come a point when it pays to just retire fully rather than bide your time and wait to get hired again. Unfortunately, the longer you stay out of the workforce, the more difficult it can become to re-enter it. The good news is that Social Security could help you make that exit gracefully, even if it means taking benefits earlier than you would have liked.
Or you may want to delay your filing
Many people have sailed through the pandemic unscathed, financially speaking, while others have seen their incomes take a hit. If you had no choice but to hit pause on your retirement plan contributions or were forced to take an early withdrawal from your savings due to the impact of the pandemic, then you may be behind in funding your IRA or 401(k). And if that’s the case, delaying your Social Security filing could help compensate.
For each year you delay your filing beyond full retirement age, your benefits increase 8%. This means that if you were born in 1960 or later and therefore have a full retirement age of 67, you have the potential to score a 24% increase in your benefits, since you can accrue delayed retirement credits up until the age of 70.
Weigh your options carefully
The fact that the pandemic has caused a lot of people to rethink their Social Security decisions isn’t surprising. You, too, may need to reconsider your filing plans, and that’s OK. You can’t undo the events of the past year, but you can think strategically about Social Security to make your personal recovery a lot easier.
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