For most retirees, Social Security will comprise an important part of their income. But since the timing of your claim can affect your monthly benefit amount, it makes sense to pay special attention to this issue.
As you may already know, everyone is assigned a “full retirement age” at which they can claim their full scheduled Social Security benefits. This age falls between 65 and 67, depending upon your year of birth. However, you can also file for benefits as early as age 62, or wait as long as you want until age 70.
If you file for Social Security benefits early, your checks will be reduced from their full amount – up to 25 percent less than they would have been otherwise. If you need to retire early due to health reasons, or absolutely need the money at age 62, this option might be an acceptable one for you. But in many cases, you could stand to lose a significant amount of money by filing for your benefits too early.
Are you still working? In some cases, those who perform hard labor can no longer work by age 62, even though they cannot qualify for disability payments. For these people, claiming their Social Security checks early might be the best option. But if you’re still able to work, then it often makes more sense to wait until your full retirement age to claim benefits.
What is your expected lifespan? No one knows this for sure, of course. But in general, you probably have a good idea of how long you will live, based upon your parents’ life spans or your current state of health. If it looks like you’ll live to a ripe old 100, it probably makes more sense to wait to claim your benefits. On the other hand, if you suspect your life span will be much shorter, claiming your benefits at age 62 could be a good idea.
Are you married? In many cases, the higher-earning spouse is the husband. Unfortunately, the husband is also statistically more likely to die first. If you’re married, it might be smart to let the higher-earning spouse delay their Social Security claim, while the lesser-earning spouse claims their benefits early. Then, if the higher-earning spouse dies, the lower-earning spouse can convert to spousal benefits at a higher rate.
Do you need the money? If you absolutely need the money at age 62, then you possibly don’t have a choice. But if you’re considering filing an early claim just to have extra spending money, it might not be the best decision. For each year that you delay your claim, up to age 70, your eventual benefit amount grows by about 8 percent. Unless you have some way of investing the money and growing it at a faster rate, it makes more sense to delay your Social Security claim until full retirement age or beyond.