One of the most challenging aspects of Social Security is picking the proper time to claim benefits. While it is possible to take benefits as early as age 62, doing so will result in a reduced monthly payout. On the flip side, waiting until age 70 to claim would result in the largest monthly check possible, but you'd also miss out on years of monthly payments had you decided to file early.
For some, the easiest solution to this conundrum is to simply claim benefits as soon as they reach full retirement age. For those born after 1960, that number is set at age 67. Below are a few scenarios in which claiming at this age might make the most sense.
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You are not in desperate need of money
The primary reason that most Social Security recipients choose to file early is that they have an immediate need for the money. Perhaps they were laid off late in life and have struggled to find a new job. Or maybe they got hit with an unexpected medical bill that has thrown a wrench into their financial plan. Regardless of the reason, if their monthly expenses exceed their income, it can make sense to file as soon as possible in order to give themselves some financial wiggle room.
However, if your financial situation is stable because you are still in the workforce, it can make sense to simply wait until you reach your full retirement age to claim. The reason is that the government will actually reduce your Social Security benefits if you choose to claim early.
For 2017, the rules state that your benefits will be reduced by $1 for every $2 that you earn above $16,920 per year if you are younger than full retirement age for the entire year. For those who will reach full retirement age at some point during 2017, the government will deduct $1 from your benefits for each $3 you earn above $44,880 until the month you reach full retirement age.
While the Social Security Administration currently considers 66 as the full retirement age, that number is set to rise gradually in the coming years. By 2022, it will climb to age 67.
You are in good health
When claiming Social Security benefits, it is important to be as realistic as possible about the current state of your health and your associated life expectancy. That's easier said than done since it can be difficult to predict or deal with your own mortality. However, if your doctor gives you a clean bill of health and longevity runs in your family, the numbers clearly favor waiting.
That doesn't automatically mean that waiting until age 70 is the smartest move. After all, your health can rapidly deteriorate as you age, so if your retirement plans call for a lot of travel, then it can make sense to claim benefits at 67 and use those funds to see the world.
If you are interested in getting a rough estimate of your current life expectancy, the SSA's website has a handy calculator that you can use.
You want to boost your survivor benefits
Far too many recipients make their Social Security filing decision based on their own health and life expectancy. While those factors obviously matter a great deal, married filers need to think about the financial situation of those they will leave behind before they pull the trigger. That's because survivor benefits are also calculated based on how old you are when you decide to file. If your health is poor and you decide to claim benefits early, then your survivors would be stuck with smaller payments for the rest of their lives, too. That's why waiting until age 67 might be the smart way to go even if it doesn't make sense based on your own finances and health.
While claiming benefits at any age has its own unique set of advantages and disadvantages, choosing age 67 certainly offers a nice middle ground that makes it worth considering.
