One of the best things about Social Security is that you get a choice as to when you sign up for benefits. You’re allowed to file as early as age 62, albeit at a reduced rate, and you can collect your full monthly benefit based on your personal earnings history once you reach full retirement (FRA). FRA is 66, 67, or somewhere in between.
You can also opt to delay your Social Security filing past FRA. For each year you do, your monthly benefit will grow.
Once you reach age 70, it pays to sign up for benefits because you can no longer accrue delayed retirement credits. But if you have a FRA of 67 and you hold off on claiming Social Security until age 70, you’ll grow your monthly benefit by 24% — for life.
At first glance, delaying your filing might seem like a wise move. And it very well may be. But before you move forward with that decision, ask yourself these important questions.
1. Have I saved well for retirement?
If your IRA or 401(k) plan is sorely lacking in funds, then it could pay to delay your Social Security claim. That’s because a higher monthly benefit could help compensate for lower retirement plan withdrawals.
But if you’re sitting on a nice, robust nest egg, then you may want to ask yourself whether claiming benefits at an earlier age will make it possible to retire earlier or enjoy certain activities, like travel, when you’re younger and healthier. If so, and you’re not necessarily reliant on a higher monthly benefit to stay afloat, then you might consider signing up for Social Security sooner — perhaps at FRA or even a few years prior, if you can afford a hit to your benefits.
2. Is my spouse waiting on me to file?
If you have a spouse who never worked, they may be entitled to spousal benefits, which equal half of your monthly Social Security benefit. But your spouse can’t collect those benefits until you submit a claim for yours. So if you have a spouse who’s eager to start receiving that money, you may not want to delay your filing too long.
3. Is my health in good shape?
When you delay Social Security, it means you pass up the opportunity to collect benefits sooner. At some point, there will be a break-even age that will leave you collecting the same amount in benefits regardless of whether you file early, late, or on time. But if you’re worried that you won’t live to or past that age, then delaying your filing may not be a wise move.
Say you’re looking at a monthly benefit of $1,600 at a FRA of 67. If you wait until age 70 to sign up for it, you’ll grow it to $1,984.
Once you reach the age of 82 1/2, you’ll break even — meaning, you’ll come away with the same total amount of money in Social Security ($197,600) regardless of when you filed initially. But if your health isn’t in the best shape, and you’re worried you won’t live until or beyond 82 1/2, then waiting to claim benefits probably isn’t your best choice.
Tempting as it may be to delay your Social Security claim to grow your monthly benefit for life, that’s also a move you could end up regretting. So it’s important to consider these questions — and answer them honestly — before making that call.
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