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Are You Really Ready to Claim Social Security?

By Christy Bieber - Sep 19, 2021 at 8:51AM

Key Points

  • Claiming Social Security too early could cost you a lot of money.
  • It can be hard to undo a benefits claim you regret.

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Before you file for benefits, make sure you've checked these items off your to-do list.

Are you thinking about claiming Social Security? This is a big decision that will affect your finances for the rest of your life, so you don't want to file for benefits until you're 100% sure you're ready. 

If you haven't done the following four things, you need to check them off your list before you can have the confidence necessary to make the best choice for Social Security.

Two adults looking at a computer together.

Image source: Getty Images.

1. Have you checked your benefits?

Before you claim your benefits, you need to know how much money your retirement income will actually provide. The amount of your monthly check is based on factors including your age when you claim Social Security and the amount earned over your career. 

You may be surprised that your payment isn't as high as you were expecting -- and may not be enough to support you without supplementary savings. That's because Social Security is designed to replace only around 40% of pre-retirement income, which likely won't be enough to live on.

First, check the amount you'll receive by signing into your mySocialSecurity account online. You'll see your estimated monthly check at different ages so you'll know exactly what you can realistically expect from Social Security. 

2. Did you coordinate with your spouse?

When you're married, your choice to start receiving Social Security checks impacts your spouse because husbands or wives may be entitled to spousal or survivor benefits. If you claim your own benefits early and you were the higher earner, you could inadvertently reduce the spousal benefits your widow would receive. On the other hand, if you decide to wait to start Social Security, your spouse won't be able to get spousal benefits until you act. 

Working together to decide on a strategy to maximize your combined lifetime income is usually the best bet. 

3. Do you have supplementary savings?

After you checked what Social Security would pay you, you probably realized that you'll need another source of funds to add to your income. And that most likely will come from your savings, unless your employer is providing a pension. 

Make sure to assess how much savings you have before you start Social Security -- and how much income it will produce. You can get a good idea of what your supplementary savings will do for you by assuming you'll follow the 4% rule, which says you can take 4% out of your retirement account in year one and adjust upwards for inflation each year. If you do that, you'll be unlikely to run out of money while you still need it.

If you have $500,000 saved, for example, you can assume your nest egg will provide an income of about $20,000. Make sure you're comfortable with your combined take-home pay in retirement, which includes Social Security plus distributions from savings. 

4. Do you know your full retirement age?

Finally, you need to know your full retirement age (FRA), as you'll have to wait that long to avoid shrinking your checks.

If you file prior to FRA, you'll be hit with monthly early filing penalties. These reduce your Social Security by a total of 6.7% annually for each of the first three years before FRA and an additional 5% for each prior year.  If you wait until after FRA, on the other hand, you'll be entitled to delayed retirement credits that raise your check amount.

Knowing your FRA is crucial to understanding how a current claim would affect how much you get each month. The chart below shows what yours is, based on birth year. 

Birth Year

Full Retirement Age

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

Data source: Social Security Administration. Chart by author.

If you know your FRA, understand the amount you'll get from Social Security, coordinated with your spouse, and made sure you have enough savings, chances are good you're ready to make an informed choice about Social Security. But until you've done all four things on this list, don't file -- lest you come to regret your choice. 

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