Your Social Security filing age could have a huge impact on your financial standing in retirement. The earlier you file for benefits, the less income you'll be entitled to on a monthly basis. And the more you delay your filing (up to a certain point), the more generous a benefit you can anticipate.
It's for this reason that some seniors prefer not to claim Social Security at age 62, which is the earliest age to sign up for benefits. Instead, they prefer to wait until full retirement age (FRA) to file, or even beyond.
In fact, for each year benefits are delayed beyond FRA, they increase 8% on a permanent basis, up until age 70. And so even seniors with the latest FRA of 67 get an opportunity to score a 24% increase to their Social Security paychecks.
But while your goal may be to delay your Social Security filing as long as possible, or at least sit tight until FRA to take benefits, you may actually want to plan on claiming them at age 62. Here's why.
You may not get a choice
Some people have every intention of working well into their late 60s or beyond. But life doesn't always work out that way.
You could end up losing your job in your early 60s, at which point you might struggle to find a new one due to circumstances outside your control (notably ageism, which is illegal but difficult to prove). Or, your health could start to decline in your early 60s, forcing you to scale back your hours at work or even leave the labor force altogether.
That's why, in the course of your retirement planning, it's actually a good idea to assume you'll have to sign up for Social Security at age 62 and lock in a lower monthly benefit for life. If you go with that assumption and ramp up your savings efforts in light of it, you'll be in a better position to cope with unwanted surprises that come your way, like having to abandon your career at an earlier age than anticipated.
Of course, this isn't to say that you should actually claim Social Security at 62. If, by the time you get to that age, your job is stable and your health allows you to keep at it, then working longer and holding off on filing for benefits could be a very smart financial move.
The point, rather, is that you shouldn't assume you'll end up with as generous a Social Security benefit as you're eligible for. Rather, to play it safe, assume you'll be locked into a lower benefit so you can plan around that accordingly.
Don't rely too much on Social Security
Regardless of what age you're able to claim Social Security at, one thing you should know is that your benefits will only replace a modest portion of your pre-retirement earnings, and that you should absolutely plan on having other income to supplement them. So even if you're confident you'll be able to claim Social Security at FRA or beyond, it still pays to save on your own.
There's really no such thing as having too much money for retirement. And so if you push yourself to save under the assumption that you'll be looking at a reduced benefit only to wind up scoring a boosted one, that's still not a bad situation to land in.