Social Security is a cornerstone of retirement income in the United States. While it’s not designed to completely fuel retirement, many people rely on it heavily in their golden years.
The program is designed to offer a substantial safety net for those who are past retirement age. It’s also designed to be flexible. It doesn’t provide a flat payout, and you don’t have to start receiving it at a certain age. When you decide to draw benefits does have a huge impact on your monthly check, though, so it’s important to file at the correct time.
There’s a tempting simplicity to the idea of waiting until the “Full Retirement Age” (FRA) to claim benefits. However, the reality is more nuanced. The “correct time” for you isn’t necessarily the correct time for someone else!
It’s important to consider factors like health, retirement plans, and spousal benefits when deciding when to claim your benefits. We’ll help you develop a personalized strategy.
What is Full Retirement Age (FRA)?
As we mentioned, the Full Retirement Age is the baseline for claiming Social Security benefits. Everything else is determined based on when your FRA is. So, before planning anything, you need to figure out your FRA.
This isn’t a one-size-fits-all answer. The FRA is based on your birth year. For anyone born in 1960 or later, the FRA is 67. At this age, you become eligible to receive your full, unreduced Social Security benefit. However, as we’ll see, this isn’t the same as receiving your maximum benefit.
If you delay past your FRA, your monthly benefit increases. Each month you don’t claim, your benefits increase by around 8% (although it varies slightly). This means waiting past your FRA can significantly increase your monthly payout.
This increase stops when you reach 70. After that, waiting longer doesn’t get you anything. However, that doesn’t mean we recommend waiting until 70. Sometimes, trying to maximize your Social Security isn’t the best option.
By delaying, you can miss out on potential income. Depending on your health, you may receive a lower amount of Social Security benefits over your lifespan if you delay retirement. There is always an element of uncertainty involved. No one knows the future. Delaying benefits hinges on the assumption that you’ll live long enough to recoup the missed months and enjoy the higher payout.
We all know this doesn’t always happen, though.
3 Factors Influencing Your Optimal Claiming Age
When determining when you should claim Social Security, there are three factors we recommend particularly paying attention to. It’s easy to get bogged down in all sorts of different factors, like economic certainty and your current career outlook.
However, all of these factors only create decision fatigue – not help you make a good decision. (Plus, when is the economy ever really certain?)
Therefore, we really only recommend paying attention to these three factors:
Health and Life Expectancy
We’d all love to live forever, but that just isn’t how life works! Once you claim Social Security, you will continue to receive it until your death. Therefore, figuring out when that end date might be is important.
No one can determine exactly when their time might be up. However, you can consider factors like your health and the overall life expectancy for your sex. If you already have a list of health problems, you may want to claim sooner rather than later. Delaying benefits can be particularly advantageous if you’re fortunate enough to enjoy good health and have a family history of longevity.
Currently, the life expectancy for males is lower than for females. Therefore, women may want to delay, while men should claim sooner.
Retirement Plans and Income Sources
Social Security is only made to provide for some of your retirement, not all. That said, nearly 40% of Americans rely solely on Social Security for their retirement. If you plan to rely mostly on Social Security, you may plan on working over retirement age to increase your monthly payout.
Those with a robust retirement nest egg, pensions, or other reliable income sources may have more flexibility when it comes to claiming Social Security. You may retire early and delay Social Security claims while living on your other income.
Alternatively, you could claim Social Security earlier without the drop in monthly payments greatly impacting your overall income.
Consider how much money you need each month during retirement. Then, determine how much Social Security you need to reach that amount.
Spousal Benefits
If you’re married, your Social Security is only one side of your retirement. You also need to consider your spouse’s potential benefits and age. Coordinate your claim age with your spouse’s benefit to develop the best retirement plan.
You may also want to consider things like survivors’ benefits and family eligibility. If your spouse doesn’t work, they may be entitled to Social Security benefits using your work history. We have a complete explainer on family eligibility for Social Security, which you can read to learn more.
Strategies for Finding Your Sweet Spot
After you’ve considered your health, retirement plans, and spouse’s benefits, we can start developing a personalized plan that considers all these factors. You can utilize several strategies to determine the best time for you to claim Social Security.
The most important takeaway is that there’s no single “best” age for everyone to start drawing Social Security benefits. You’ll have lots of people recommending that you maximize your benefits by waiting until 70 or retiring the second you hit full retirement age. Neither of these choices may be the best option for you, though!
Your ideal age depends on your specific circumstances; only you know those in and out.
Utilize Online Resources
Fortunately, there are many resources to help you make this decision. You can determine your full retirement age, which should be the basis for your decision. You can also get a benefit estimate based on when you retire at different ages.
The Social Security Administration does a good job of helping people have access to as much information as possible, helping you make a good decision. However, all this information doesn’t help unless you use it. Take advantage of their calculators!
We have more links to calculators and SSA resources in our Social Security explainer.
Collect All Your Information Beforehand
Many people are inaccurate about their annual income—never mind their top 35 years of income. We recommend gathering your earnings history in the planning process, not basing your plan on a guess. You can request a Social Security earnings statement online, which will give you an accurate look at your income.
Consider Professional Guidance
Seeking professional help can always be beneficial, especially if you have a complicated financial situation. Financial advisors can take a look at your specific circumstances and provide customized advice.
This is also a good option if you’d rather pay someone else to do the math. Let’s be honest: sometimes, it just makes more sense to outsource the planning process, especially if it leads to more money during retirement.
Run a “Break-Even” Analysis
Look at your current budget and determine how much income you’d need to comfortably retire. You’ll likely need to adjust your budget to fit your retirement lifestyle. For instance, without a commute, you may be driving significantly less. However, you may also be traveling more, which can get expensive.
Maybe you plan on downsizing or even moving in with a family member. Consider these changes when determining how much money you will need.
Next, look at your other sources of retirement income. Do those income sources help you reach your monthly retirement budget? How much more do you need, and can Social Security help you get there? Do you need to delay retirement to increase your benefits? Can you afford to retire early and take a percentage off your monthly check?
Factor in Potential Future Changes
We cannot see the future, but we can consider potential changes that are likely to occur. Is there any part of your retirement plan that may not turn out exactly how you want it to? For instance, do you have a chunk of your retirement savings in risky investments? Are you planning on selling your house? What happens if the housing market isn’t in your favor?
The more moving parts in your retirement plan, the more likely something will go wrong. However, if you think ahead, you’ll also have more flexibility.
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