If you’ll be at least 62 in 2027, it means you’ll have the option to sign up to start getting Social Security benefits. And whether you’re retiring or not, you may be eager to start getting those monthly checks next year.
But it’s important to understand certain nuances of Social Security before filing a claim. Here are three must-knows if taking benefits is part of your plan next year.
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1. You’ll need to wait until full retirement age to avoid reduced benefits
While age 62 is when Social Security benefits become available to older Americans, you’ll need to wait until full retirement age arrives to collect those benefits without a reduction. If you were born in 1960 or later, full retirement age is 67. File any sooner, and you’ll lose a portion of your benefits for life.
2. Waiting past full retirement age offers a world of upside
While waiting until full retirement age helps you avoid getting stuck with reduced Social Security checks, delaying your claim beyond that point could put a lot more money in your pocket throughout retirement. Each year you delay your claim beyond full retirement age permanently boosts your benefits by 8%.
The delayed retirement credits you accumulate for delaying run out at age 70. But all told, with a full retirement age of 67, your Social Security checks could be 24% higher if you wait until then.
And remember, the larger your Social Security benefits are to begin with, the more valuable each annual cost-of-living adjustment should be for you. Larger benefits on your part could also lead to larger survivor benefits if you’re the higher earner in your household and expect your spouse to outlive you.
3. Your benefits will probably only replace about 40% of your wages
As crucial as it is to understand the financial impact of different Social Security claiming ages, it’s equally important to realize how much replacement income those benefits are designed to provide. If you’re someone earning an average wage, you can expect Social Security to replace about 40% of it. Knowing that should help inform your decision to claim.
It may be that you expect to need 75% of your pre-retirement income to live comfortably once you stop working, which isn’t so uncommon. If you know your savings will only cover about 25%, it’s a sign that delaying Social Security for larger monthly checks might make sense.
The decision to claim Social Security is an important one. If it’s something you’re thinking of doing at any point in 2027, make sure you understand the role your filing age plays and the amount of replacement income your benefits might provide.
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