Filing for Social Security is a decision not to be taken lightly. Now that a new year is upon us, you may be wondering if the time is right to sign up for benefits. And if you’re not sure, ask yourself these key questions.
1. Am I reaching full retirement age this year?
Full retirement age, or FRA, is the age at which you’re allowed to collect your full Social Security benefit based on your earnings history. You can file for benefits well ahead of FRA — as early as age 62, in fact. But for each month you claim Social Security early, your benefits get reduced.
The opposite happens if you opt to delay your filing past FRA. For each month you hold off on signing up, your benefits increase, up until you turn 70.
While you don’t have to wait until FRA (or beyond) to claim Social Security, if you want to avoid a reduction in benefits, that’s the age you’ll need to hold out for. You can consult this table to see what your FRA looks like:
Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 or later
2. Am I still working?
You’re allowed to work and collect Social Security at the same time. But if you do so before reaching FRA, you’ll risk having some of your benefits withheld. Whether that happens or not will depend on whether your income exceeds the Social Security earnings-test limit for 2022.
Even if you’ve already reached FRA, if you’re still working at the start of 2022 and plan to continue working the entire year, you may not need the money from your benefits to pay your expenses. And in that case, it could pay to delay your Social Security filing for a larger benefit for life. Having a higher benefit could buy you more financial freedom down the line, even if you’ve saved decently for retirement and expect to maintain a fairly modest lifestyle.
3. Am I happy with my retirement savings?
Many people near the end of their careers with millions of dollars socked away in an IRA or 401(k). If that’s the position you’re in, congratulations. And also, if that’s the case, you’re probably free to claim Social Security whenever you choose, since those benefits will most likely constitute just a small portion of your total retirement income.
But if you’re not thrilled with your retirement savings balance, then you may not want to claim Social Security this year — not if you have the option to delay your filing and grow your benefits even more. Even if you hold off on signing up for a single year beyond FRA, that will still result in an 8% boost to your benefits. That’s a pretty decent guaranteed return.
What’s the right move for you?
Claiming Social Security in 2022 could work out well for you. Or, it’s a decision you might end up regretting. If you’re not sure whether to file this year, take the time to run through the above questions. Doing so could help you approach your choice with more confidence.
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