This is a question that comes up time and again. As advisers, many people think we have the exact age and date that each person should file and claim their Social Security. We don’t. However, sometimes we jokingly respond, tell me when you’re going to die. Claiming your Social Security involves many factors and personal decisions.
Claiming at an age to draw the maximum amount of Social Security is not the only reason, nor the best, to file your claim. When you claim is a combination of factors such as age, relationship status, health, family longevity, and importantly, financial need.
It is true that if you claim before your Full Retirement Age (FRA) you will receive less per month, for life, than if you claim at your FRA. You can boost your benefit approximately 8% per year between your FRA and age 70 in the form of delayed retirement credits. Do not wait beyond age 70 to claim because your benefit no longer grows. Another point to keep in mind is that the government bases your benefit on actuarial tables and is designed with actuarial neutrality in mind. Theoretically, you will draw about the same amount of benefits over your lifetime whether you start drawing your benefit at age 62, or if you wait until your FRA to start drawing your benefit. This is sometimes referred to as the ‘breakeven point’ and generally occurs somewhere between the ages of 77 and 83. That, however, is looking at your benefit in a vacuum.
So, when should you claim? Here are a few tips to keep in mind. If you want to run estimates, meet with a financial planner to discuss your options.
Your health. Are you in generally good health and sound mind? Consider working a little longer and delaying your claim until at least FRA or later. If you’re not in good health, and struggling to cover expenses, go ahead and claim early.
Family longevity. If your family members have all passed away at an early age, consider claiming earlier rather than later. Conversely, if your family holiday parties look like a centenarian club meeting, consider delaying your claim until age 70.
Are you single, or married? You may need to coordinate benefits if you are married and may want to look at a maximum claiming strategy with your spouse. This way, when your spouse passes away, you’ll be eligible for the maximum benefit possible. Remember, you’ll be drawing one benefit at that point, not both. If you are single, you’ll need to look at your other assets in addition to your health and longevity.
Age. If you are part of a married couple, your ages may be a key factor in when to claim your benefit and which benefit type to claim. It may also be a factor in deciding who claims first especially if there is a big age difference.
Your assets. If you need the income due to an unexpected early retirement, job loss, or lack of savings then claim your Social Security. If you have saved a sufficient amount for retirement and can delay, then do so.
Keep in mind there is no one-size answer when it comes to claiming your Social Security. You need to consider all relevant factors and understand that claiming early could lead to a permanently reduced monthly benefit for life. Claiming at FRA or later will lead to a larger monthly benefit. This is important because it is for life and your cost of living increases will be based on your monthly benefit.
As an independent Certified Financial Planner™, I can help you with your claiming strategy. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #claim #socialsecurity #CFPPro