There's a reason many people aim to sign up for Social Security at age 67. Age 67 is full retirement age (FRA) for anyone born in 1960 or later. And waiting until FRA to file for Social Security means getting to claim the full benefit you're entitled to based on your personal wage history.
But while it's a good thing to aim to file for Social Security at 67, that plan may not work out. You could end up having to sign up for benefits at an earlier age. Or, financial worries might prompt you to sign up at a later one.
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Why you may have to file before age 67
A survey conducted by the Employee Benefit Research Institute a couple of years back found that 48% of workers end up retiring sooner than planned. The reasons for being forced into retirement early could run the gamut from health issues to layoffs to other life circumstances.
But either way, you may have to file for Social Security before age 67 if your income situation takes a turn for the worse and you wind up needing that money to stay afloat. Just know, however, that for each month you sign up for benefits ahead of FRA, they get reduced on a permanent basis.
The earliest age you can sign up for Social Security is 62. If your FRA is 67 and you're forced to file as early as possible, you'll be looking at a 30% hit to your benefits.
It's for this reason that saving aggressively for retirement in an IRA or 401(k) plan is a good bet. Having more income to tap could spare you a world of financial worries if you're forced to claim benefits at an earlier age than anticipated.
Why you may have to file after age 67
Your plan may be to save as well as you can for retirement and then take your benefits at age 67, when you're entitled to them in full. But what if you reach your FRA of 67 and realize your nest egg isn't in great shape?
That could be the case because you didn't pump enough money into it while you were working. Or, it could be that you invested your savings too conservatively and didn't enjoy as much growth in your retirement plan as you would've liked.
Either way, if, come age 67, you realize you'll be more reliant on Social Security in retirement than expected, then you may have to delay your filing to give your benefits a boost. For each month you hold off on filing past FRA, your benefits will increase by two-thirds of 1%. This means that delaying your filing one year will result in an 8% boost, and waiting until age 70 will result in a 24% boost.
Once you turn 70, you can't grow your Social Security benefits any more. But you may feel compelled to wait until then rather than file at 67.
Prepare to be flexible
There's nothing wrong with aiming to claim Social Security at 67. But it's important to recognize the reasons why that may not work out and be willing to adjust your plans if need be.
