Choosing an age to claim Social Security isn't easy. If you file for benefits early -- meaning, before you reach full retirement age -- you'll reduce them on a permanent basis. If you delay your filing past full retirement age, you'll get a higher monthly benefit, but you'll then have to wait longer to get your money.
Either way, there's one important step you can take ahead of retirement that will make the decision of when to claim your benefits much easier: Amass a healthy level of savings in a dedicated retirement plan.
Taking the pressure off of Social Security
Let's get one thing out of the way: Social Security is not supposed to serve as your sole income source in retirement. The average senior today collects a little more than $1,500 a month, which, chances are, is a lot less than what you collect in your paychecks. In fact, Social Security will generally replace about 40% of your pre-retirement income if you earn an average wage, and most seniors need roughly twice that amount of money to enjoy retirement and cover their expenses throughout it.
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Of course, you have the power to slash or raise your monthly Social Security benefit, depending on when you file. But if you want to sweat that decision a lot less, save a lot of money in advance of your senior years. That way, Social Security won't be your main source of income once your career comes to an end, so your decision won't carry quite as much weight.
Imagine you close out your career with a sizable IRA or 401(k) balance -- enough money that you can easily pay the bills and live comfortably without getting any money from Social Security at all. At that point, the pressure on the filing front is lifted. If you claim benefits before full retirement age and reduce them in the process, so what? Maybe you'll enjoy having that money sooner, and that way, the hit your monthly benefit takes won't really impact you financially.
Meanwhile, filing for benefits at your precise full retirement age could also work out well in that scenario. If you have plenty of savings, you won't feel pressured to claim your benefits sooner to get help covering your bills, in which case, you can enjoy a higher monthly benefit once the time comes to start collecting it. The same applies to delaying benefits -- if you decide you'd like to get a boost, a robust savings account balance will give you the option to wait.
As a general rule, it's a good idea to try to get the bulk of your retirement income outside of Social Security -- especially since we don't know if benefits will be cut in the future. If you make an effort to save well during your working years, your Social Security income may be negligible compared to what your IRA or 401(k) withdrawals look like. That way, you won't have to worry about when you file for benefits or what happens to those benefits once you start collecting them.
