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Many people have big plans for 2022 — travel more, get a new job, or buy a home. But one of the plans you may be toying with is signing up for Social Security.
You’re allowed to file for Social Security once you turn 62. If you were born in 1960 (or earlier), you’re eligible to claim your benefits in the new year.
But before you do, make sure that’s the right call. In fact, if these circumstances apply to you, signing up for Social Security in 2022 is a move you might sorely regret.
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1. You haven’t reached full retirement age
The option to claim Social Security kicks in once you turn 62. But that doesn’t make it the optimal age to sign up for benefits.
You’re not entitled to your full monthly benefit based on your earnings history until you reach full retirement age, or FRA, which hinges on your birth year. If you were born in 1960 or later, it’s 67. Otherwise, it’s 66, or 66 and a specific number of months.
If you have an FRA of 67 and you file for Social Security at 62, you’ll slash your monthly benefit by 30% — for life. This may not be a big deal to you if you’re sitting on a nest egg worth millions. But if you expect Social Security to be an important source of income for you during retirement, then you may want to hold off on filing.
2. You don’t need the money right away
Even if you’ll be reaching FRA in 2022, if you can get by financially on withdrawals from your savings, a job, or both, then you may not want to sign up for Social Security immediately. For each year you delay your benefits past FRA, you’ll increase them by 8%, up until the age of 70. (In fact, every single month you hold off on filing results in a small boost.)
You may be thinking that there’s no need to grow your benefits since you have a decent chunk of savings and expect to live modestly. But retirement has a sneaky way of costing more than people anticipate. If you’re not desperate for your benefits right away, you may want to wait to claim them.
3. You’re unhappy with your retirement savings
Some people enter retirement with robust nest eggs. But if you’re not happy with your 401(k) or IRA balance, then holding off on claiming Social Security beyond 2022 may be a good idea. If you’re not turning 70 in 2022, you have an opportunity to boost your benefits and make up for a savings shortfall.
Of course, if you are turning 70 in 2022, then by all means, claim your benefits as a birthday gift to yourself. There’s no financial incentive to delay your Social Security filing beyond that point.
Claiming Social Security in the new year could end up being a smart decision for you. Or not. Consider these points carefully before moving forward so you don’t wind up unhappy with your choice — and stuck with a monthly benefit that doesn’t pay you enough.
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