You have a choice when it comes to signing up for Social Security. You're allowed to file for benefits as early as age 62, or you could delay your filing until the age of 70. In fact, technically, you can file after age 70, but there's no reason to wait beyond that point.
The age at which you claim benefits will determine how much money you get during retirement. And so it's important that you run through these key questions before signing up.
1. What's my full retirement age?
Full retirement age, or FRA, is when you're entitled to your full Social Security benefit based on your earnings history. That age falls between 66 and 67, depending on when you were born.
For each month you claim benefits before FRA, they get reduced. And if you sign up at the earliest possible age of 62, you'll face a 25% to 30% reduction in your Social Security income, depending on your FRA.
If you don't want to see your benefits get cut in any way, then you'll need to wait until FRA to file for them. At the same time, you may decide to delay your filing past FRA.
For each month you hold off, your benefits increase. And if you wait until age 70, you'll score a 24% to 32% boost that will remain in place for the rest of your life.
2. What do my retirement savings look like?
The less money you have socked away in a retirement plan, the more reliant on Social Security you're likely to become as a senior. Before you sign up for benefits, assess your savings. But don't just look at your current IRA or 401(k) balance. Instead, figure out how much annual income it will give you.
Say you're sitting on $600,000 in retirement savings. That might seem like a lot of money. But if you're only comfortable withdrawing 4% of your nest egg each year, that leaves you with $24,000 a year in income from your savings.
If you think you'll need a lot more money than that to keep up with your bills and meet your retirement goals, then you may decide to delay your Social Security filing to lock in a higher benefit. Or, you may decide to at least wait until FRA.
3. How's my health?
Filing for Social Security before FRA might leave you with less money on a monthly basis. But if your health is poor and you don't end up living a long life, you could come out ahead financially on a lifetime basis. On the flip side, if your health is great and you think you'll live till your mid-80s or beyond, then delaying your filing will likely put more lifetime Social Security income into your pocket.
Of course, it's possible to start off retirement with poor health and have it improve, or to start off with great health that takes a turn for the worse. But either way, consider your health when making your filing decision.
4. Is my spouse likely to outlive me by many years?
Generally, if your health is poor going into retirement, it's a good idea to claim Social Security early. But that only applies if you're single and have only your own needs to think about.
If you're married, and you think your spouse will outlive you by many years, then you may not want to file so early. Once you pass away, your spouse will be entitled to survivors benefits from Social Security that equal the amount you collect each month while you're alive. And if you think your surviving spouse will be reliant on that income, you may want to wait to file to lock in a higher benefit.
The decision to claim Social Security can be a tricky one. Make sure to answer these questions carefully before moving forward with yours.