Choosing a filing age for Social Security isn't easy. You're entitled to receive your full monthly benefit based on your earnings history once you reach your full retirement age, or FRA. That age is either 66, 67, or 66 and a specific number of months -- it will all depend on the year you were born.
However, you're allowed to file for benefits as early as age 62, and as late as you want -- though there's no financial incentive to hold off past the age of 70, and so it's generally considered the latest age to file.
Now if you claim your benefits at any point ahead of FRA, they'll be reduced on a permanent basis (unless you withdraw your benefits claim and repay the money you collected within 12 months -- at that point, you'll get the chance to file again). On the flip side, for each year you wait to take benefits past FRA, you'll boost them by 8% via delayed retirement credits. These credits stop accumulating at 70, though, which is why there's no sense in holding off further.
Because taking benefits at 70 gives you the maximum possible boost, it's an age worth considering when contemplating the right time to file. But you should ask yourself these two questions to see if 70 is the right age for you.
1. What do my savings look like?
If you're nearing retirement without much savings, and you don't have another obvious source of income, like a pension, then there's a good chance Social Security will serve as your primary (or only) paycheck during your golden years. And that's problematic, because those benefits will only replace about 40% of your pre-retirement income if you were an average earner, and most seniors need roughly twice that amount to keep up with their bills. Therefore, if you're extremely lacking in the savings department, claiming Social Security at age 70 makes sense.
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On the other hand, if you've saved nicely for your golden years, you may not want to hold off on Social Security for that long if you're planning to use the money to travel or do other enjoyable things. If that's the case, filing earlier could be a better decision for you.
2. What does my health look like?
The state of your health should play a big role in dictating your Social Security filing age, because the better it is, and the more likely you are to live a long life, the more delaying benefits until 70 makes sense. Social Security is actually designed to pay you the same total lifetime benefit regardless of when you initially file, because if you boost your benefits by delaying, you'll also collect fewer payments than you would by filing earlier. This formula only works, however, if you live an average lifespan. If you expect to die young, then filing on the early side makes sense, and if you expect to live longer than the average senior, filing at 70 could be your best bet financially.
Say you're entitled to a monthly benefit of $1,500 at an FRA of 67. Waiting until 70 to file will boost each payment you receive to $1,860, and age 82 1/2 is your breakeven age in this scenario -- meaning, at 82 1/2, you'll end up with $279,000 in lifetime benefits by filing at 67 or 70. Therefore, if you think you'll live past 82 1/2, filing at 70 could be the right move.
Though claiming Social Security at 70 isn't the best choice for everyone, it could be a smart decision for you. Carefully assess your savings and health, and will any luck, you'll end up happy with the age you land on.
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