It’s a dilemma for anyone approaching retirement. When should you file for Social Security benefits? The general wisdom is that it’s better to delay your filing as long as possible. The longer you wait, the higher your benefit is likely to be.
Despite the fact that waiting leads to increased benefits, most people do not wait to file their claim. In fact, nearly 90 percent of all eligible Americans file a claim for Social Security at or before their full retirement age. The most common filing age is 62, which is the earliest point at which one can claim benefits.1
Filing early would seem counterintuitive, since it permanently locks you in at a reduced benefit amount. Clearly, however, most Americans make the decision that an early filing is right for them.
Your decision should be based on your specific needs and goals. Consider your income, expenses, health and tolerance for risk. Below are a couple of questions to ask yourself as you decide when to file for Social Security:
Can you afford to wait?
From a purely mathematical perspective, it’s always better to wait to file. Most people reach their full retirement age (FRA) between the ages of 66 and 67. Your FRA is the age at which you can file for full Social Security benefits. You can file as early as age 62. If you file before your FRA, however, your benefit could be permanently reduced as much as 25 percent.2
If you wait past your FRA to file, your benefit is increased. Social Security offers a credit of 8 percent for every year past your FRA that you delay your filing. You can delay all the way to age 70. If your FRA is 66 and you wait until age 70 to file, your benefit will increase 8 percent for four years, for a total increase of 32 percent.3
Of course, your decision may be based on more than math. You may need income earlier than age 70. Perhaps you’re facing a forced early retirement due to job loss or physical disability. Maybe you want to retire before age 70 but need Social Security to fund your lifestyle.
Take a close look at your budget and think about how you can delay your filing. Could you work part time? Could you cut back on some expenses to reduce your cost of living? Although it may be tempting to file early, it certainly pays to wait.
What is your life expectancy?
Another important consideration is your life expectancy. Obviously, you can’t predict when you will die. However, it’s possible you have health conditions that make it unlikely that you will live late into retirement.
If you feel it’s likely that you won’t live well beyond 70, you might consider taking your benefits early. After all, it doesn’t pay to wait if you will receive the benefits for only a year or two. However, don’t rely on family history when making this decision. Medical treatment has advanced significantly and continues to do so. Just because your parents or grandparents passed away early into retirement doesn’t mean you will, too.
Ready to develop your Social Security strategy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. 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. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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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