Like you, I'm looking forward to receiving a monthly Social Security check when I'm older. Though I'm a ways off from retirement, I've already got big plans for how I want to spend it, and every dollar helps.
But even though I could sign up for Social Security as soon as I turn 62, I'm not going to. And there's only one thing that could make me change my mind.
Why I'm not rushing to sign up for Social Security
The age you sign up for Social Security is actually a pretty big deal. It determines how large your checks will be and, consequently, how much you get from the program overall. So if you want to maximize your benefit, you have to choose your starting age strategically.
You can sign up as early as 62, but doing so shrinks your checks. If you want the full benefit you've earned based on your work history, you have to delay until your full retirement age (FRA). That's somewhere between 66 and 67 for today's workers.
Signing up at 62 docks your checks by 30% if your FRA is 67 or 25% if your FRA is 66. If you qualify for the average Social Security check of $1,658 per month at your FRA of 67 and you sign up right away at 62, you'll lose nearly $500 per month.
That said, you'll receive checks for more years. This could turn out to be the smarter play if you don't live as long. But for someone who lives into their 80s or beyond, starting Social Security early usually costs them a lot of money.
The only reason I'd claim early
If I had reason to believe I wouldn't live past my 70s, I'd definitely sign up for Social Security right away. I'd want to claim as much money as I could while I was still alive because I wouldn't be able to reap the benefits of larger checks down the road.
But right now, I'm pretty young and healthy, and I expect to remain so for the foreseeable future. That's why my current plan is to delay Social Security past my FRA of 67 until I qualify for my maximum benefit at 70.
If I do this, I'll get 124% of my full benefit per check. Those with an FRA of 66 who wait until 70 will get 132% of their full benefit per check. For those who qualify for the $1,658 average monthly benefit at their FRA, delaying until 70 could add anywhere from $400 to $500-plus to their monthly benefit amount.
Since I expect to have a reasonably long life, I believe delaying Social Security will help me secure my largest lifetime benefit, which will help me stretch my personal savings further.
A downside to delaying benefits is that I'll have to cover all of my retirement expenses on my own until I turn 70. But I'm prioritizing retirement savings right now, so I don't anticipate that being an issue. If necessary, I could always delay retirement so I could afford to put off Social Security until I was ready to claim.
What's right for me may not be right for you
Just because I plan to delay Social Security until 70 doesn't mean that's what you should do. You have to make that call yourself, based on your life expectancy and financial situation.
If you're struggling to decide, creating a my Social Security account on the Social Security Administration website might help. You'll find a calculator that will show you how much you'll get from Social Security at any age between 62 and 70 based on your work history.
Make note of your monthly benefit amount for a few ages you're considering. Then, multiply each of these figures by 12 to get your estimated annual benefits. Finally, multiply your annual benefits by the number of years you expect to claim benefits to get your estimated lifetime benefit.
For example, if you expect a $1,500 benefit at 62 and think you'll live to 82, you'd multiply $1,500 by 12 to get an annual benefit of $18,000. Then you'd multiply this by 20 years to get a lifetime benefit of $360,000.
It may not seem that important to know when you're going to sign up for benefits if you're not eligible to claim yet, but having a plan can help you figure out how much you must save for retirement on your own. You can always make adjustments later on if your goals change. But if you have a plan to work from, you can reduce your risk of running out of money prematurely.
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