What's the right age to sign up for Social Security? It's a question many people ask themselves, especially as retirement nears.
The fact that you get a choice in your Social Security filing age is actually a bit of a mixed bag, because it can make your decision difficult. If you claim benefits at your exact full retirement age (FRA), you'll get your complete benefit based on your earnings history. If you sign up at age 62, you'll slash your monthly benefit but get your money sooner -- and possibly get to retire sooner.
You can also delay your filing beyond FRA. For each year you do, your benefit increases 8% up until age 70.
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Waiting longer to collect Social Security is not an easy thing to do. But here's why you may want to go that route -- even though it might pose a challenge.
It's all about guaranteed income
Ideally, you'll be entering retirement with a decent chunk of cash in an IRA or 401(k) plan. But the amount of monthly income your savings will provide will hinge on different factors, including how well your investments perform. And unfortunately, there's no guarantee that they'll perform well.
On the other hand, if you delay your Social Security filing past FRA, you're guaranteed an 8% boost to your benefits for each year you hold off. That boost won't be dependent on the stock market's performance or circumstances outside your control. And that guarantee could make waiting worthwhile.
Of course, not everyone has the option to delay a Social Security claim. Some people are forced out of a job earlier in life due to layoffs or health issues. But if you're able to keep working, waiting to file for Social Security could really pay off in the long run. Not only might it give you more financial flexibility in retirement, but it might also give you some much-needed peace of mind.
Keep in mind that if waiting until age 70 to claim Social Security seems overly difficult, you can always sign up for benefits at age 68 or 69. Doing so will still boost that income stream substantially, leaving you with a higher monthly payday for life.
What's the right call?
You might spend a lot of time contemplating your Social Security filing decision. But no matter what age you land on, make sure to consider the upside of a guaranteed boost to your benefits.
It especially pays to think about delaying your filing if you're coming into retirement with a nest egg that's not as robust as you would've liked it to be. A higher Social Security benefit could help compensate for the lower monthly withdrawals you'll be left with due to that savings shortfall.
Finally, you might consider delaying Social Security if your health is excellent in the years leading up to retirement, and you're confident you'll live a long life. In that scenario, you're likely to not only come out with a higher monthly benefit, but also a higher lifetime benefit.
