Personal Finance
Social Security Timing: 3 Questions to Help You Decide When to File
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Your Social Security filing age helps determine what your monthly benefit looks like.
Consider your level of savings and health/lifespan when making your choice.
Also think about how reliant your spouse might be on Social Security survivor benefits.
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Claiming Social Security is one of the most significant things you might do in the course of retiring. So it’s important to put a lot of thought into that decision rather than dive in and hope for the best.
You should know that generally speaking, your window to claim Social Security is between ages 62 and 70. Technically, you can sign up for benefits beyond age 70, too. But since you won’t be rewarded financially for doing so, 70 is typically considered the latest age to claim Social Security.
In the middle of that eight-year window is your full retirement age (FRA), otherwise known as the age when you can claim your complete monthly Social Security benefit without a reduction. FRA is 67 for anyone who was born in 1960 or later.
Because your Social Security filing age will help determine how much money the program pays you each month for life, it’s important to ask the right questions before you put in your claim. Here are three essential ones you can’t afford to gloss over.
Even if you enter retirement with plenty of savings, you could technically end up in a situation where you run out. But the more savings you have, the less likely that is to happen. And also, the more savings you have, the more monthly income your nest egg should be able to provide you with.
It’s important to consider how much savings you have when making your Social Security filing decision. A larger nest egg gives you the leeway to claim your benefits earlier if you want to do that and get the money sooner. On the flipside, with a smaller nest egg, you may not be in a position to reduce your monthly benefits for life, which will happen if you sign up before reaching FRA.
In assessing your savings, though, don’t just look at the balance in your IRA or 401(k). Instead, figure out how much of that balance you can afford to safely withdraw each year so you can see what monthly income you’re looking at.
If you realize your nest egg will give you $2,000 a month, and you expect to need $5,000 a month to retire comfortably, then you’ll want to see what Social Security benefit you’re entitled to at FRA. If it’s $2,500, you may want to delay your claim past FRA long enough to boost it to $3,000 to reach the monthly income you want.
Delaying Social Security means being able to collect more money on a monthly basis, but not necessarily a lifetime basis. The latter depends on how long you end up living beyond your filing date.
Now in the absence of a crystal ball, that can be hard to predict. But you can consider your health as well as your family history when making that call. Either way, though, it’s important to calculate your break-even date when thinking about Social Security.
Say you’re looking at a monthly benefit of $2,000 at an FRA of 67. Filing at age 70 will boost that monthly benefit to $2,480, but you won’t break even — meaning, wind up with the same lifetime payout — until age 82 and 1/2. So if you’re worried you won’t live past 82 and 1/2, then you may not want to wait until age 70 to sign up for benefits.
When you’re single, you only have to think about yourself when deciding when to sign up for Social Security. But if you’re married, you should consider the needs of your spouse — especially if they’re a lot younger than you and earned a lot less than you did.
In that scenario, your spouse might depend heavily on survivor benefits from Social Security once you pass away. And the longer you wait to claim Social Security, the more money you can leave behind for your surviving spouse to collect on a monthly basis.
Of course, if you and your spouse were basically equal earners, then it may be that you don’t have to worry so much about survivor benefits because they’re in line for a pretty generous Social Security benefit of their own. But it’s important to talk things through with your spouse to make sure you’re both on the same page.
You may also want to consult a financial advisor for their input on when to claim Social Security based on your savings, lifestyle goals, health, and family situation.
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