They say patience is a virtue, and when it comes to Social Security, it certainly can be. That's because filers who delay their Social Security claims are rewarded financially.
You're entitled to your full monthly Social Security benefit based on your personal wage history once you arrive at your full retirement age (FRA). That age is either 66, 67, or 66 and a specific number of months, depending on your year of birth.
But you don't have to file for Social Security at your precise FRA. You're allowed to sign up as early as age 62, but filing at any point ahead of FRA will result in a reduced benefit for life. Similarly, you can delay your filing past FRA and lock in a higher monthly benefit for life in the process.
Now once you turn 70, you can't grow your Social Security benefits any more. But if you're willing to be patient and delay your filing until the age of 70, you could see your monthly benefit increase between 24% and 32%, depending on your exact FRA.
At first, that might seem like a smart bet. But in some cases, it's a decision that could backfire.
Waiting doesn't always pay
If you don't have a lot of money in retirement savings, then you may be motivated to delay your Social Security filing so you can grow your benefits on a monthly basis. And even if you have a decent-sized nest egg, you may be eager to snag a higher monthly Social Security benefit to give yourself more spending power. But while delaying your claim is guaranteed to give your benefits a monthly boost, it doesn't guarantee you a higher lifetime payout from Social Security.
There's a break-even point you'll need to consider when you're thinking of delaying your Social Security filing. If your FRA is 67 and you're looking to delay your filing until age 70, then your break-even point is age 82 1/2. That means that's the age you'll have collected the same amount of money from Social Security in both filing scenarios. And so you'll need to ask yourself whether you think you're likely to live until 82 1/2 or beyond. If not, then postponing your filing until age 70 won't make sense.
It could even pay to file early
While holding off on claiming Social Security could result in a richer monthly payday, it's not necessarily your best move. In fact, Social Security filers are often cautioned not to claim benefits ahead of FRA, since doing so can reduce them tremendously. But if your health is poor, and you're unlikely to live a long life, then filing at age 62 could actually make a lot of financial sense.
Ultimately, it can be hard to nail down the right timing for claiming Social Security. But one thing you should know is that while exercising patience may be a good thing to do in life, it's not necessarily the right call when it comes to signing up for your benefits.
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