If you’re approaching retirement, one of your biggest decisions may be when you should file for Social Security benefits. It’s not an easy decision. On one hand, you’ve likely been paying into the system for decades, so it’s understandable that you would like to start receiving benefits. On the other hand, you may not need income right away, and you might want to increase your benefits by waiting.
Filing for Social Security isn’t as simple as filling out some forms and waiting for checks to arrive. Once you file, your decision is permanent. There is no way to change your filing or your benefit amount in the future. Because it’s a permanent decision, it’s important that you analyze your income needs and determine when it’s the right time for you to file.
Generally, your Social Security benefits are impacted by your work history, your earnings history and when you file relative to your full retirement age (FRA). You can’t go back in time and change your work and earnings history, but you can control when you file.
Your FRA is the earliest age at which you can file without seeing a reduction in benefits. Most people reach their FRA between their 66th and 67th birthdays. If you file for benefits at your FRA, you will get the full benefit amount available based on your work and earnings history.
However, you can also file as early as age 62 and as late as age 70. If benefits are available at age 62, why should you wait? And what’s the benefit of waiting all the way until age 70? These are common questions. Below is information about filing early and filing late, to help you decide which is right for you.
You can file for benefits as early as age 62. However, that doesn’t necessarily mean you should file early. If you file before your FRA, you will see a permanent reduction in benefits. The earlier you file, the greater the reduction. For instance, if your FRA is 67 and you file at age 62, you will see a permanent 30 percent reduction in your annual benefit. If you file at age 66 with an FRA of 67, the reduction is only 6.7 percent.1
Even though an early filing results in a reduction, there are still reasons why it makes sense. For instance, if you anticipate a short life expectancy in retirement due to health issues or family history, you may want to start collecting as soon as possible. If you need income and Social Security is your only option, it may make sense to file early.
You also don’t have to file at your FRA. Rather, you can delay your benefits all the way until age 70. Why would you delay Social Security benefits? The Social Security Administration offers an 8 percent annual benefit increase for every year that you delay filing past your FRA.2
As an example, assume your FRA is 66. You wait as long as possible, to age 70, to file for benefits. You would receive a permanent 8 percent benefit increase every year for four years, for a total benefit increase of 32 percent. If you don’t need your Social Security income at your FRA, there’s strong reason to delay filing.
The decision on when to file can be complex. It likely depends on your unique needs, expenses and income sources. Contact us at Baacke Insurance Services. We can help you analyze all of the factors involved and develop the appropriate strategy. Let’s connect soon and start the conversation.
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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