Choosing when to file for Social Security benefits is an important decision, particularly if you expect to depend on your monthly checks for a substantial portion of your retirement income.
The age at which you begin claiming benefits has a direct impact on the amount you receive each month. By claiming as early as possible at age 62, you'll receive smaller checks. But if you wait until age 70 to file for benefits, you could potentially receive hundreds of dollars more per month.
On the surface, delaying benefits may seem like the best move in order to maximize your monthly checks. But there's one good reason to consider claiming early -- it could help your savings last longer if the market crashes.
The advantage of claiming early
Although many people choose to retire and claim benefits simultaneously, you don't necessarily have to do both at the same time. In fact, you could choose to retire in your early 60s, but then wait a few years to claim benefits so you can collect those bigger checks.
However, delaying benefits after you've already retired means you'll need to survive on your savings until you're ready to claim. If you have a robust retirement fund, that strategy may be feasible. But if you can't afford to depend solely on your savings for years, claiming early may be a smart move.
Claiming early may be a particularly good idea if the market crashes, too. During a market downturn, stock prices drop and your investments may lose value. Withdrawing your savings during a downturn could result in selling your investments at a lower price, thus locking in losses.
Of course, if you're retired and are living off your savings, you may have no choice but to withdraw at least some money from your retirement fund. But if you can minimize the amount you withdraw, your losses won't be as substantial, and your savings will likely last longer. By claiming Social Security early, you can rely less on your retirement savings and give your investments more time to recover.
When you shouldn't claim benefits early
Although it can sometimes be wise to claim Social Security early, it's not always the right move for everyone. In some cases, delaying benefits could be a better option.
For example, if your savings are sparse and you have the option to work a few years longer, you might choose to give yourself more time to save and also hold off on claiming benefits at the same time.
Another scenario where it might be a smart move to delay benefits is if you have reason to believe you'll live a longer-than-average life span. The average American can expect to live roughly 79 years, according to the Centers for Disease Control and Prevention. If you end up living a very long life, there's a good chance your savings will run dry. By delaying benefits and earning bigger checks, though, you'll be able to enjoy your later years more comfortably than if you'd claimed benefits earlier.
Nobody knows whether a market crash is looming, but a downturn could wreak havoc on your retirement plans. By using Social Security to your advantage, however, you can maximize your savings and enjoy a more financially secure retirement.