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Should COVID-19 Make You Rethink Your Social Security Filing Strategy?

By Maurie Backman – May 6, 2020 at 7:23AM

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If the ongoing crisis has you worried about retirement, you may want to take a different approach to claiming Social Security.

The COVID-19 crisis has impacted millions of Americans, from younger workers to those on the cusp of retirement. If you fall into the latter camp, the circumstances you're facing could be causing you to reevaluate your plans to claim Social Security. Here's what you need to know about filing for benefits sooner or later than you initially anticipated.

Claiming benefits early

The monthly Social Security benefit you collect in retirement is determined based on your earnings history -- specifically, your 35 highest-paid years in the workforce. You're entitled to collect that full benefit once you reach, or FRA, which is either 66, 67, or somewhere in between, depending on the year you were born.

Older man with serious expression at laptop


You're allowed to file for Social Security beginning at age 62, but for each month you do, your benefits are reduced on what's generally a permanent basis. Now, let's say you were initially planning to file for Social Security at FRA, but your current financial circumstances have you worried -- say, you're out of a job or fear a layoff is imminent. Should you claim benefits early so you have that money flowing in, even if it means facing a potential lifelong reduction?

If you never intended to claim Social Security early, then avoiding that scenario is a good way to keep your retirement on track. But whether avoiding an early filing is possible will depend on what your financial picture looks like.

If you really don't have the money coming in to keep up with your bills, claiming benefits ahead of FRA is a better bet than racking up debt just to live. But before you file early, think about the income sources you may have available. If you've been laid off, there's a good chance you can qualify for unemployment benefits, which are now higher due to the COVID-19 relief package that passed in March. You may also have emergency savings and cash in a brokerage or retirement account you can use to stay afloat. Therefore, while claiming benefits early may be a move you ultimately resort to, don't go there until you've exhausted other options.

Claiming benefits late

Though you're entitled to your full monthly Social Security benefit at FRA, you don't have to file at that point. Rather, you can delay your benefits and boost them by 8% a year in the process, up until age 70.

If your plan has always been to claim Social Security on time, and you're struggling with financial anxiety due to the ongoing crisis, delaying benefits could be a smart move if you're still working and therefore don't need the income immediately, or if you've lost your job but the income you're getting from unemployment is close to what your former paycheck looked like (weekly benefits now get a $600 boost, so if you were a moderate earner, you may find that your weekly income on unemployment isn't remarkably different).

How will delaying benefits help you? By giving your monthly retirement income a guaranteed boost, you gain protection against future market volatility that could impact your retirement savings. In recent months, retirement plan balances fell across the board due to COVID-19. That's problematic for seniors who are already in the process of taking withdrawals regularly from their savings to pay the bills. Since we don't know how long the COVID-19 crisis will drag on, and what long-term economic impacts it will have, you may feel more financially secure knowing you'll have a few extra hundred dollars a month coming your way in retirement courtesy of delaying your Social Security filing.

Should you change your Social Security plans?

Whether you opt to alter your Social Security strategy may ultimately depend on how badly the ongoing crisis has impacted your personal finances, and what fears and concerns you have for the future. Ultimately, there's no right or wrong thing to do. It's easy to make the argument that in today's climate, delaying benefits is smart, but you may wind up in a situation where filing early makes more sense. The key, either way, is to understand the implications of filing at different ages, and also, to know your own FRA. The more informed you are, the less likely you'll be to regret your decision, no matter what it ends up being.

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