When I first started learning about Social Security, one of the things that stood out in my mind was how easy it is to set yourself up with larger monthly benefits for life. All you need to do is delay your claim until age 70 (or delay beyond full retirement age), and voilà — a higher monthly benefit is yours forever.
On the flip side, when I began doing research on Social Security, I couldn’t believe how many people were filing for benefits ahead of full retirement age to get their money sooner. Claiming benefits early means reducing them for life, and at first, I wasn’t a fan of doing so.
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But I’ve since changed my tune on Social Security. And I no longer think filing for benefits early is a mistake at all.
It’s a matter of circumstances
The earliest age to sign up for Social Security is 62. If you file then, and your full retirement age is 67, you’re talking about a 30% reduction in your monthly payments for life. That’s a pretty harsh blow. And it’s a blow a lot of people can’t afford.
Many seniors enter retirement short on savings. Last year, Northwestern Mutual put the average balance among baby boomers at about $120,000. Slashing your Social Security benefits by claiming them early is a dangerous move when your savings are sorely lacking.
But a lot of people enter retirement with way more savings than that. And what can I say? I’m hoping to be in that boat. And if that’s the case, then I don’t think a hit to my monthly benefits would be so detrimental. Plus, I like the idea of getting my benefits early so I can make good use of the money while I’m able to.
Claiming early can sometimes work out
Another thing to consider about claiming Social Security early is that it could actually result in a higher lifetime payout, despite getting smaller benefits each month.
My father-in-law recently passed away suddenly at 78 years old despite being in great health throughout his senior years. I have no idea how old he was when he signed up for Social Security. But if he waited, he probably shorted himself on lifetime income and would’ve been better off taking benefits early based on the age of his passing.
Obviously, nobody has a crystal ball. And there’s no sense in assuming you’ll pass away fairly young. But if you can afford the hit to your Social Security benefits because you’ve saved well, and the money can do something meaningful for you during your early 60s, then you may want to consider claiming Social Security sooner rather than later once you’re eligible.
You don’t necessarily have to make that decision alone, though. Even if you’ve managed your savings and investments your entire life, it’s not a bad idea to talk to a financial advisor and get their input.
To be clear, I’m not saying I’ve decided definitively to claim Social Security early. All I’m saying is that I no longer think it’s a bad idea off the bat. And you may find that it’s actually the perfect decision for you.
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