One of the biggest decisions you'll make in retirement is when to file for Social Security benefits. There are lots of trade-offs involved: You can collect as early as age 62 but get benefits that are considerably lower, wait for much larger benefits at 70 but miss out on eight years of collecting, or settle for something in between.
Today, we're going to be tackling that "in-between" area, and three terrible reasons to choose this route.
You need the Social Security money far earlier than age 67
According to a 2016 GAO report, 60% of American households have absolutely no retirement savings through plans such as 401(k)s or IRAs. Furthermore, the report estimates that by the time it reaches retirement, a typical American household that's in the lower 50% of earnings would only be able to use its retirement savings to safely provide up to $12,000 per year.
For most families, that's not enough to cover basic expenses. Obviously, if a pension is involved, that could be a huge help. And if you're able and willing to work, that could help mitigate circumstances significantly.
But if that's not available, filing for Social Security as early as possible makes the most sense. It would be absurd to wait until age 67 if you find yourself in this scenario.
You were the higher earner in a dual-income household
If you and your spouse both held jobs during your working years, coordination on when to file for benefits is crucial. Under ideal circumstances, the lower earner files earlier in his or her 60s to provide some income and allow the couple to retire. The higher earner then waits as long as possible to file for benefits.
This is especially useful when the husband is the higher earner, because wives typically outlive their husbands. And because the data shows that men typically earn more over the course of their careers than women do, the husband will usually have a higher Social Security benefit.
If the husband then dies first, because his benefit is bigger, the wife forfeits her previous benefit and assumes her husband's. If the husband is able to wait until age 70 to file for benefits, it means he'll be leaving more for his wife to live off after he passes away.
If providing that extra income is important in your personal situation, then filing for benefits at 67 wouldn't be the best, as it would lower the amount you'll be able to leave your loved one.
Just because it's the "full retirement age"
For those born in 1960 or later -- in other words, those aged 56 and older -- full retirement age is 67 years old. This is the age at which you'll receive your "full" benefits, as calculated by your earnings and the Social Security Administration's benefits equation.
But don't just shoot to file for benefits at age 67 because of this moniker. Choosing when to take benefits should be centered on your own situation first and foremost. If you need the money earlier, take it. If you don't need it at all but want to save it, then delay.
I've never heard of anyone on his or her deathbed saying, "I wish I would have filed for Social Security benefits at my full retirement age." More likely, you'll be focusing on things like your life's accomplishments and time with family and loved ones. Let that be the North Star that helps inform when you should file for Social Security benefits.
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