When should you file for Social Security? It’s a question that every retiree faces. You can file anytime from age 62 to 70. However, age 62 is by far the most popular age for filing. More than 34 percent of all recipients file as soon as they’re eligible.1
As you may know, there’s a cost to filing early. If you file before your full retirement age (FRA), your benefit could be reduced as much as 35 percent. The closer you are to your FRA when you file, the lower the reduction. These reductions are permanent, however, so they can have a big impact on your financial stability in retirement.
Does that mean filing early is always the wrong move? Not necessarily. Your decision on when to file should be based on your unique situation, and there could be certain situations in which an early filing is appropriate. Below are three such situations. You also may want to consult with a financial professional to help you chart a strategy that aligns with your needs and objectives.
You need the money.
Clearly, if you’re eligible for Social Security and have no other options for income, you may want to consider filing early. It’s possible that you may have to end your career before you’re ready. For instance, you might suffer a disability that limits your ability to work. Or you might be laid off and have difficulty finding work.
Before you file, however, be certain that you won’t go back to work. Social Security may reduce your benefits if you file early and then go back to work before you reach your FRA. That means you could see a reduction not only for filing early but also for earning additional income.
The increased benefit amount isn’t important to you.
Yes, you can get a higher benefit by waiting until your FRA or even beyond to file. However, it may be possible that you aren’t concerned with the increased benefit. Maybe you have significant retirement income from a pension, investments or other sources. Perhaps the increased Social Security benefit won’t have much impact on your lifestyle or financial stability.
If so, it may make sense to file early. By filing at 62 you get a few extra years of benefits, which may help you reduce distributions from your savings. That could help you increase your savings and provide greater financial stability in the future.
You have reason to believe you don’t have a long life expectancy.
It may not be pleasant to think about your own death, but life expectancy is an important part of retirement planning. That’s especially true when it comes to Social Security strategy. If you have reason to believe you won’t live late into retirement, it may make sense to file early. After all, there’s no point in getting an increased benefit at age 70 if you only receive it for a few years.
Perhaps you have a chronic health condition that’s likely to limit your life expectancy. Maybe you’ve been told by a doctor that you have some health issues that may reduce your life span. However, don’t base this projection solely on family history. Medical technology has advanced significantly. Just because your parents or grandparents passed away early in retirement doesn’t mean the same will be true for you.
Ready to develop your Social Security strategy? Let’s talk about it. Contact us at Baacke Insurance Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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