Please ensure Javascript is enabled for purposes of website accessibility

Eligible for Social Security? 3 Moves You Need to Make

By Maurie Backman - Feb 26, 2021 at 6:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Before you file for benefits as soon as you're able to, do these important things.

Social Security will probably end up being a pretty important income source for you once you leave the workforce and the paycheck you've collected for years goes away. You're allowed to file for Social Security as soon as you turn 62, though you're not entitled to your full monthly benefit based on your work history until several years later. As such, if you're newly eligible for Social Security, here are three important moves to make.

1. See what your estimated monthly benefit looks like

Filing for Social Security at 62 will leave you with a reduced benefit for life. Depending on your circumstances, claiming benefits at 62 could make sense, but before you decide whether to go that route or not, you'll need to know what your monthly benefit actually looks like. And your annual earnings statement will tell you that.

Loose pile of Social Security cards

Image source: Getty Images.

Each year, the Social Security Administration (SSA) issues workers an earnings statement summarizing their taxable wages for the year. That statement also includes an estimate of benefits at full retirement age.

You can access that statement online by creating an account on the SSA's website, or look for a copy you may have received in the mail. Once you see what benefit you're entitled to, you'll be in a better position to decide whether you can afford to reduce it or not.

2. Figure out how much income your savings will give you

Social Security should not be your sole source of income during retirement. Rather, you should ideally have savings to live on, as well. But if your savings aren't robust, you may need to lean more heavily on Social Security to cover your bills, so before you decide whether to file as soon as you're eligible or wait, you'll need to assess your nest egg and see how much annual income it's likely to provide.

As a general rule, plan to withdraw about 2% to 4% of your savings balance each year. You can, and should, adjust that withdrawal rate based on your needs and finances, but you can work with this range as a starting point. If you're sitting on a $400,000 retirement plan balance, sticking to that range will give you $8,000 to $16,000 a year in income outside of Social Security. From there, you can estimate your living expenses and see if you should file for Social Security at 62 or hold off and grow your benefits instead.

3. Talk to your spouse

The Social Security decisions you make could impact your spouse. For example, if you're much older than your spouse and expect to pass away much sooner, know that the higher a monthly benefit you lock in, the higher your spouse's survivor benefit will be. You should also coordinate your filing with your spouse if they are entitled to a monthly retirement benefit based on their work record, as it could make sense for one of you to claim Social Security early while the other waits.

Reaching the age of 62 means you're entitled to collect Social Security -- but that doesn't necessarily mean you should. Weigh your options before rushing to sign up so you don't regret your decision after the fact.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.