If you’re approaching retirement, you may be facing a number of important decisions. Should you downsize to a smaller home? Will you work part time in retirement? How much can you afford to spend on discretionary items like shopping and travel? What will you do with all of your newfound free time?
One of your most important decisions is when to file for Social Security. The timing of your filing is so important because it heavily impacts the amount of your benefit. The longer you wait to file, the higher your benefit is likely to be. Also, your filing is permanent. There’s no changing it after the fact.
Your Social Security benefit is based on something called your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays. However, you can file as early as age 62 and as late as age 70.1
While it may be tempting to file as early as possible, there are compelling reasons to wait. Depending on your situation, it also may make sense to file early. The answer is based on your unique needs and goals.
Not sure what’s right for you? Below are a few things to consider as you make your decision:
Why You Should File Early
It may be tempting to file as soon as possible. You’ve been a contributor to Social Security nearly your entire adult life. Now is the opportunity to become a recipient.
Generally, it’s advisable to resist this temptation and instead wait as long as possible. However, there are legitimate reasons why it may make sense to file today. The most obvious is if you need the money and Social Security is your only option. Perhaps you were forced into retirement because of health or job loss. With limited income, you may desperately need Social Security income.
Another potential reason to file early is if you’re anticipating a shorter life expectancy. Perhaps your parents died early in retirement, or maybe you have health issues that are likely to cut your life short. If so, you may want to consider filing now. Why wait until age 70 to file if you may only live into your late 60s or early 70s?
Why You Should File Late
The reasons to delay Social Security are based in the math of the Social Security system. When you file before your FRA, your benefit is permanently reduced, possibly as much as 30 percent. The amount of your reduction depends on how many years remain until you reach your FRA.1
If you wait past your FRA, though, you will begin receiving credit on your benefit. Social Security offers an annual 8 percent credit for every year past your FRA that you wait to file. For example, if you wait until age 70 and your FRA is 66, you will receive a total 32 percent benefit credit. That’s 8 percent per year for four years.2
Not sure when you should file? Let’s talk about it. Contact us today at Intelliplan Financial. We can help you analyze your needs and develop a strategy. Let’s connect today.
Citations.
1https://www.ssa.gov/planners/retire/retirechart.html
2https://www.ssa.gov/planners/retire/delayret.html
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.
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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