Though Social Security is a program that’s loaded with strict rules, one way it’s not so strict is that seniors get choices on when to sign up. The earliest you can claim your benefits is age 62, and while there’s technically no end date for signing up, it doesn’t make financial sense to delay your filing past the age of 70.
Still, it’s important to claim your benefits strategically, since chances are they’ll end up being an important income source for you throughout retirement. Here are three essential factors that should play into your Social Security filing decision.
1. Your full retirement age
You may be eligible to start collecting Social Security once you turn 62, but you won’t be able to collect your full monthly benefit based on your wage history until you reach full retirement age, or FRA. FRA hinges on your year of birth, and for each month you claim benefits ahead of it, they get reduced.
You can consult this table to find your FRA:
If Your Year of Birth Is:
Full Retirement Age Is:
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 or later
While filing for benefits even a month before FRA will cause a reduction, waiting even one month past FRA will result in an increase to your Social Security checks. But you’ll need to know your FRA before making any sort of filing decision.
2. Your health
One of your goals in claiming Social Security may be to get as much money out of the program as you can. We just learned that filing before FRA will result in a lower monthly benefit, and delaying your filing past FRA will result in a higher one. But while it’s easy to fixate on monthly benefits, it’s also important to think about your lifetime benefit — the total amount of money Social Security pays you throughout your retirement. And the state of your health might really play into that.
If your health is in great shape, you might come out ahead financially by delaying Social Security as long as possible. That’s because if you live a very long life, you’ll get more out of the program by waiting to file. On the flip side, if your health is poor, and you don’t think you’ll live very long, it generally makes sense to claim benefits as early as possible for a higher lifetime benefit.
Here’s an example. Say you’re entitled to $1,500 a month at a FRA of 67. If your health is poor and you pass away at 76, you’ll come away with a lifetime benefit of $176,400 by filing at age 62. Filing at FRA would, in this example, give you a lifetime benefit of $162,000, while filing at 70 would leave you with a lifetime benefit of $133,920.
Now, say your health is strong going into retirement and you pass away at age 88. In that case, filing at 70 will leave you with a lifetime Social Security benefit of $401,760. Filing at FRA will leave you with $378,000, and filing at 62 will leave you with just $327,600.
3. Your retirement savings balance
You’ll need a decent amount of income to pay your bills as a senior. And the less of a nest egg you bring with you into retirement, the more dependent you’re apt to be on Social Security.
If you’re not sitting on much in the way of savings, and your health is decent, delaying your filing as long as possible could make sense — whereas if you have millions in your IRA or 401(k) plan, you may decide that you’d rather take your benefits early and use that money to travel while you’re still relatively young. Either way, the amount of savings you have should play into your thought process.
Claiming Social Security at the right time could spell the difference between an easier retirement and a more stressful one, financially speaking. Keep all of these key points in mind when making your filing choice.
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