It's normal to be eager about signing up for Social Security benefits. You've spent decades paying into the program, so of course, you want to reap the rewards. But rushing to sign up can actually cost you in the long run. Before you fill out that application, take a minute and make sure you know the answers to the three questions below.
1. Why does it matter when I claim Social Security?
The age you claim Social Security at dictates the size of your monthly checks. You can sign up as early as 62, but if you want the full benefit you're entitled to based on your work history, you must wait until your full retirement age (FRA) to sign up. More on that below.
Every month you delay benefits increases your checks slightly until you reach 70, when you qualify for your maximum Social Security benefit.
But this doesn't mean that delaying benefits is always best. You have to weigh your life expectancy and financial situation as well. If you don't expect to live long or you can't pay your bills without Social Security, signing up early is probably smart. Otherwise, you'll probably get more overall by waiting to sign up.
2. What's my full retirement age (FRA)?
Your FRA is the age at which you become eligible for your full Social Security benefit based on your work history. The government assigns this to you based on your birth year. For those who were born from 1943 to 1954, your FRA is 66. Then, it rises by two months every year thereafter until it reaches 67 for adults born in 1960 and later.
Those who choose to sign up for Social Security right away at 62 only get 70% of their full benefit per check if their FRA is 67 or 75% if their FRA is 66.
Your FRA affects your maximum benefit too. Those with an FRA of 66 get 132% of their full benefit per check if they wait until 70 to sign up, while those with an FRA of 67 only get 124% of their full benefit per check at 70.
You can find out your FRA and see how much you can expect from Social Security at various starting ages by creating an account at My Social Security. You'll need to answer some questions the first time you create your account to prove your identity, but once this is done, you can create a password for logging in again.
3. How will working while claiming Social Security affect my benefit?
It's possible to claim Social Security while you're still working, but doing so can cause your benefits to become subject to the Social Security Earnings Test. This withholds a certain dollar amount from each of your benefit checks if your income exceeds a certain threshold.
If you'll be under your FRA for all of 2022, you'll lose $1 from your checks for every $2 you earn over $19,560. But if you'll reach your FRA in 2022, you'll only lose $1 for every $3 you earn over $51,960 if you reach this amount before your birthday.
The good news is money lost to the Earnings Test isn't gone forever. Once you reach your FRA, the government recalculates your benefit amount to account for the money it previously withheld. That means your future check will be a little bigger. But they still won't be nearly as large as they would've been if you'd just delayed Social Security until your FRA without claiming.
If you don't need your Social Security benefits to cover your costs, it might be better to wait until you retire to sign up rather than working and claiming at the same time. Delaying benefits, even for a few months, can make a lasting difference to your checks.
Hopefully, the information above wasn't new to you, but if anything surprised you, you probably want to review the suggestions here and think carefully about when you plan to sign up for Social Security. This might take a little time, but it can help you secure your largest possible benefit, so it's worth the effort.