One nice thing about Social Security is that it's flexible. You don't have to sign up for benefits at a single age, but rather, you get an eight-year window to file that starts at 62 and ends at 70. (Technically, you can claim benefits after you turn 70, but there's no financial reason to wait beyond your 70th birthday.)
Because 62 is the earliest age to file for benefits, it's an age many seniors opt for. But you should know that for each month you sign up for Social Security ahead of your full retirement age (FRA), your benefits will be reduced on a permanent basis.
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FRA depends on your year of birth. You can consult this table to see what yours looks like:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 |
67 |
Data source: Social Security Administration.
Claiming benefits before FRA is considered filing early. And despite getting that option, here are three reasons why you may not want to do that.
1. Your higher benefit will be yours for life
If you bring a sizable nest egg into retirement, there's no guarantee that your savings will last. If your investments do poorly, you may not be able to withdraw as much from your IRA or 401(k) from one year to the next.
On the other hand, if you don't file for Social Security early, the higher benefit that ensues will be yours to enjoy for the rest of your retirement. And there's something to be said about that guarantee.
2. Your expenses could come in higher than expected
Many people assume that once they retire, they won't spend nearly as much money as they did while they were working. But while some of your bills might shrink, you shouldn't necessarily plan to get by on half of your former income or less -- not unless you're truly making drastic changes.
That's why it pays to get more money from Social Security. The higher those benefits, the easier a time you'll have managing your various costs in retirement.
3. You may live longer than planned
U.S. life expectancies have gone up through the years. That's a good thing, but it also poses a financial challenge -- namely, that you might deplete your savings in your lifetime.
That's why you may not want to take Social Security benefits early. If your savings end up running out, you'll need more money from Social Security, not less, to compensate and keep up with your expenses as you age.
What's the right call?
Narrowing down a Social Security filing age is not easy, since there are pros and cons to claiming benefits at different points in time. And in some cases, filing for benefits ahead of FRA does make sense.
But before you go that route, do consider the drawbacks of claiming Social Security early. And if you're thinking of filing for benefits at age 62, you may want to land on a compromise that has you claiming them closer to FRA to minimize the hit you'll take. If your FRA is 67, filing at 64 or 65 could end up being a better choice than signing up for Social Security the moment you're eligible.
