If retirement is on the horizon, you may be gearing up to claim Social Security. But the decision to file for benefits is a big one. After all, the monthly benefit you lock in is the sum you can expect to receive for the rest of your life (not including annual cost-of-living adjustments, of course), so it's important to get that decision right.
You might think you're ready to claim Social Security based on different factors. But before you do, check these key items off your list.
1. See what monthly benefit you're entitled to
You might assume you're in line for a certain monthly benefit, but that number may be lower than expected. That's why it's a good idea to check your most recent earnings statement and see what benefit you may actually receive. That information is available online. All you need to do to access it is create an account at SSA.gov.
Say you were expecting to receive $2,000 a month from Social Security. But when you access your most recent earnings statement, you see you're only in line for $1,800. That might sway you to delay your filing a bit so you can grow your monthly benefit into a higher sum.
2. Assess your retirement savings
Ideally, Social Security will only represent a portion of your total retirement income, and you'll have savings to supplement your monthly benefits. Before you put in your claim, it's important to see how much buying power your savings are likely to give you.
Say you've managed to accumulate a $500,000 IRA or 401(k) plan balance. That's not a small sum of money. But remember, you also need that money to last for what could be several decades.
If you decide to withdraw from your savings at a rate of 4%, which is what financial experts have long recommended, that will leave you with $20,000 in annual income. If you were expecting more, that may be a harsh wake-up call -- but delaying your Social Security filing to score a higher benefit could help compensate.
3. Make sure your spouse is on-board
If you're married going into retirement, it's not just your own financial needs you'll have to consider. You'll also have to think about what's best for your spouse.
Imagine your spouse never worked and is a lot younger than you are. Once you pass away, your spouse will be eligible for survivors benefits equal to the sum you collect each month from Social Security. If you claim your own benefits early, you'll leave your spouse with less income, but if you delay your filing, you'll leave your spouse with more.
Or it may be the case that your spouse was a high-enough earner that they're entitled to a decent benefit of their own. In that case, you may want to coordinate your filings so that at least one of you is growing your benefit by delaying your claim. The point, either way, is to have those conversations so you're on the same page.
Don't rush into things
The decision to sign up for Social Security isn't one to take lightly. Make sure you tackle these key tasks before claiming benefits. If you don't, you might end up regretting your decision big time.