Social Security: Should You File Now or Later?

As retirement approaches, you’ll likely face a number of big decisions. How should you allocate your investments? Which Medicare options should you choose? Do you continue to work part time? Should you downsize?

One of the biggest decisions you will face, though, is when you should file for Social Security benefits. It’s an important decision because it’s permanent. Once you file and begin receiving benefits, you won’t have an opportunity in the future to change your selection. That’s why it’s important for you to take some time and consider your needs and objectives.

When it comes to Social Security, you have a number of choices, but they all usually boil down to two broad options: now or later. Each option comes with its own set of benefits and considerations. Taking benefits now could give you instant income but possibly a reduced benefit amount. Waiting may give you more income, but you’ll have to wait to get it.

Which is right for you? There’s no universal right answer. It depends on your specific needs and goals. Below are a few things to keep in mind and why each option could be right for you:

Filing for Benefits as Soon as Possible

The earliest you can file for Social Security benefits is age 62. However, the earliest you can file for benefits without a reduction is at your full retirement age (FRA), which is between the 66th and 67th birthdays for most people.1
If you take benefits before your FRA, your payment will be permanently reduced, possibly by as much as 30 percent. The amount of reduction depends on just how early you file. The closer you are to your FRA, the smaller the reduction.2

Why would you take benefits early if it results in lower payments? There are a few reasons.

• You don’t expect to live long in retirement. Perhaps you have a medical condition that could cut short your life expectancy, or maybe your family has a history of not living very long. If you think there is a good chance you may not live long in retirement, it may make sense to take benefits now.

 

• You have a life goal that can’t wait. Maybe you want to travel the world while you’re still healthy, or perhaps you’re anxious to spend your time volunteering with your favorite charity. If you need Social Security income to achieve that goal, and you’re OK with the reduction, consider filing early.

 

• You need the money. Some retirees enter retirement under challenging financial conditions. They may have been laid off or become disabled. They may face significant bills. If this is your situation and Social Security is your only income option, it may not make sense to live in poverty so you can get a higher payout years down the road.

Waiting to File for Benefits

If possible, delaying benefits could be a wise idea. Social Security currently offers a permanent 8 percent credit to your benefits for each year you wait past your FRA to file. The longest you can wait and earn the delay credit is to age 70.3

Remember, it’s a permanent 8 percent increase for every year it’s delayed. That means that if your FRA is 66, you could delay for another four years up to age 70. Four years of an 8 percent credit would yield a total 32 percent increase in your benefits.

What are the signs that delaying is right for you?

• You have other sources of income. Perhaps most important, you need to have income to support yourself while you’re waiting for Social Security benefits. Whether it’s from investment income or part-time work, make sure you can fund your needs while you delay.

• You’re financially disciplined. If you plan on being retired for years without Social Security income, you may need to live on a tight budget. The last thing you want is to drain your retirement assets while you wait for Social Security. Make sure you can live within your means.

• You expect to live a long life. Social Security is critical if you live a long retirement, because it’s one of the few available sources of guaranteed lifetime income. If you are healthy or your family has a history of living to old age, consider waiting so you can maximize your benefits.

Not sure about your plan for retirement income and how social security fits into it? Contact us at Carstens Financial Group in Arnolds Park, Iowa. We can help you analyze your needs and objectives. Let’s connect soon and schedule a time to talk.

1https://www.ssa.gov/planners/retire/1943.html
2https://www.ssa.gov/planners/retire/applying2.html
3https://www.ssa.gov/planners/retire/delayret.html

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov

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