Millions of seniors count on Social Security to keep up with their retirement expenses, which is why claiming benefits at the right age is important. Though those benefits are calculated based on your lifetime earnings, the age at which you file for them will affect the amount you collect each month.
If you claim benefits at full retirement age, you'll be eligible for the exact amount your earnings record entitles you to. That age is either 66, 67, or somewhere in between, depending on your year of birth.
You don't have to file for benefits at full retirement age. You can claim them as early as age 62, but in doing so, you'll reduce them by a certain percentage for every month you file early. You can also delay them past your full retirement age and grow them by 8% a year in the process.
Now, you'll often hear that when it comes to Social Security, waiting to file is always a good idea, since it can result in a higher monthly benefit. But here are three cases when it pays to claim benefits immediately.
1. You've lost your job and can't pay your bills
Unfortunately, many people get laid off in their 60s, at which point finding new work becomes a challenge. Companies are often hesitant to hire older workers, because they feel these workers are past their prime and on the verge of retiring.
If you've lost your job and have plenty of savings to fall back on, there's no need to rush to claim Social Security. But if you have little to no savings and need those benefits to pay your bills, then there's little sense in delaying them and racking up loads of costly debt in the process. When you take on debt later in life, you risk carrying it with you to the grave, not to mention wrecking your credit at a time when you might really struggle to rebuild it.
2. Your health is poor
Social Security is technically designed to pay you the same total lifetime benefit regardless of when you initially file. The logic is that the reduction in benefits you'll face by filing early will be offset by the greater number of individual payments you'll collect. And on the flip side, if you delay benefits past full retirement age and boost them in the process, you'll also get fewer payments in your lifetime.
That logic, however, assumes that you'll have an average lifespan. If your health is poor, and you don't expect to live a very long life, it generally pays to claim benefits as early as possible, since doing so will get you the highest possible lifetime payout.
Let's say you're entitled to $1,400 a month from Social Security at a full retirement age of 67. Filing at 62 will drop each payment you get down to $980, but you'll collect 60 more payments. If you live until age 78 1/2, you'll pretty much break even under either scenario -- meaning you'll get the same total in your lifetime whether you file at 62 or wait until 67. But if you pass away at 75, which is younger than the average senior, you'll come out over $18,000 ahead by filing at 62. Therefore, if your health isn't great, you might want to rush to take benefits as soon as you can.
3. Your 70th birthday has come and gone
The longer you delay your Social Security benefits, the higher your monthly payments stand to be. That said, once you turn 70, the delayed retirement credits for holding off on benefits cease to accrue. So there's no sense in waiting past that point.
If you've already turned 70 and haven't started taking benefits, file for them right away. Social Security will only pay you up to six months of retroactive benefits, so the sooner you claim them, the less likely you'll be to lose out on income that's rightfully yours.
They say that good things come to those who wait, but sometimes, that isn't true for Social Security. If any of the above scenarios apply to you, filing right away is generally your best bet.