Determining when to file for Social Security benefits is one of the biggest retirement decisions you’ll make, so it’s important to choose carefully.
If you rush this decision and claim before you’re ready, it could cost you down the road. On the other hand, if you wait too long to file for benefits, you might regret not claiming sooner.
There’s no one-size-fits-all answer as to when you should claim. But there are a few signs that you’ve done your homework and are ready to file for Social Security now.
1. Your savings are in good shape
Social Security benefits are only designed to replace around 40% of your pre-retirement income. That means, unless you can drastically reduce your expenses once you retire, you’ll need some other source of income to make ends meet.
Exactly how much you should have saved will depend on a variety of factors, including your future expenses and how many years you expect to spend in retirement. Your desired lifestyle as a retiree could also affect your expenses, and you could end up increasing your spending levels after you retire.
If you don’t know how much you should save or you’re expecting Social Security to be your sole source of income, it may be wise to hold off on claiming for now.
2. You know how your age will affect your benefit amount
The age you file for benefits will directly affect how much you collect each month. If you claim at your full retirement age (FRA) — which is either age 66, 66 and a few months, or 67, depending on the year you were born — you’ll receive the full benefit amount you’re entitled to based on your work record.
If you claim before your FRA (as early as age 62), you’ll receive a reduced amount. By delaying benefits, you’ll earn a bonus for each month you wait up to age 70. Theoretically, you can delay benefits past age 70, but it won’t result in any additional money each month.
The age you begin claiming is a personal decision, and there’s not necessarily a right or wrong answer. But when you know how that age will affect your monthly payments, it will be easier to plan for retirement.
3. You have a strategy with your spouse
If you’re married and your spouse is also entitled to Social Security, it’s a good idea to come up with a strategy for when each of you will claim.
You might decide to file at the same time, for example, regardless of your ages. Or, perhaps one of you will claim earlier while the other delays. That way, you can score some extra cash earlier on in your retirement while still taking advantage of the larger checks you’ll receive by delaying.
Also, while it may not be pleasant to think about, it’s wise to consider both of your lifespans. If one spouse passes away, the other may be entitled to the deceased person’s entire benefit amount in survivors benefits. If you have reason to believe one of you will outlive the other, it may be a good idea to consider how survivors benefits play a part in your strategy.
It can be challenging to decide when to claim Social Security, but the more you prepare, the better off you’ll be in retirement. If you’ve considered these three factors, you may be ready to start claiming Social Security as soon as possible.
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