There's a good chance you'll depend pretty heavily on Social Security once you retire. Even if you manage to bring a nice-sized nest egg into retirement with you, you may look to those benefits to help pay for basic expenses or to fund the activities you've always dreamed of doing.
That's why it's important to claim Social Security at the right age, and to that end, you get choices. The earliest age you can sign up for Social Security is 62. And while there's technically no latest age to sign up, there's no financial benefit to delaying your filing beyond age 70.
But there are consequences that come with filing for benefits early and claiming them late. And if you'd rather play things safer, you may want to plan on signing up for Social Security at your exact full retirement age (FRA).
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What does FRA look like for you?
FRA is not universal. Rather, it depends on when you were born. It's also the age you're entitled to your full monthly Social Security benefit based on your earnings history without a reduction. Check out this table to see what your FRA is:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
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 or later |
67 |
Data source: Social Security Administration.
Why it pays to file for Social Security at FRA
When you claim Social Security ahead of FRA, your benefits get reduced. And filing at age 62 means slashing your benefits by 25% to 30%, depending on your FRA. That's a risky thing, because if you end up depleting your nest egg faster than expected, or your retirement living costs end up being higher than expected, you might need more income from Social Security to help compensate.
Similarly, there's a risk in delaying your filing beyond FRA -- that you won't end up living a long enough life for that to be your best financial move. See, delaying your claim will result in a higher monthly benefit. It won't necessarily score you a higher lifetime benefit, though. To get that, you'll generally need to live a pretty long life, and if you pass away in your 70s, delaying your filing will generally mean ending up with less Social Security income all in.
That's why filing for benefits at FRA may be your safest bet. That way, your benefits aren't reduced, but you also don't have to wait too long to collect them. If you end up with health issues that shorten your life expectancy, you can at least take comfort in the fact that you didn't wait too long to first start receiving your benefits.
What's the right call?
The decision to claim Social Security clearly isn't one to take lightly. You may be tempted to file for benefits before FRA to get your money sooner. Or, you may decide that delaying your filing is the more financially sound choice.
But both of those moves have the potential to be risky. This isn't to say that either is the wrong call, but make sure you know what you're getting into before filing early or late. And if you don't want to bear the risks involved, consider filing at FRA instead.
