As you head into retirement, it's wise to start thinking about what age you want to file for Social Security benefits. You can begin claiming as early as age 62, or you can wait a few years and earn larger payments each month.
Many experts recommend waiting as long as possible to file for benefits, as that will result in the biggest checks. However, there are two important reasons delaying may not be worthwhile.
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1. You're betting on longevity
In theory, the amount you receive in benefits over a lifetime should be roughly equal regardless of when you claim. By filing early, you'll receive smaller payments but more of them over a lifetime. If you delay, you won't collect as many checks, but each one will be larger.
However, these calculations assume you'll live an average lifespan. Your breakeven age is the age at which you'll receive more money over a lifetime by delaying benefits compared to filing early.
Your exact breakeven age will depend on your benefit amount, but for most people, it falls somewhere around your late 70s or early 80s. If you live longer than that, you could collect more in total by delaying benefits. If you don't live that long, though, you may come out ahead by filing earlier.
Of course, nobody can predict exactly how long they will live. But by delaying benefits, you're essentially betting on your longevity. If you have reason to believe you might not reach your breakeven age, you could be better off filing for Social Security earlier.
2. You could regret your decision
Generally, once you file for Social Security, your benefit amount is locked in for life. However, if you file early, you do have a couple of opportunities to change your mind.
After you file, you have 12 months to reverse your decision. You will need to repay all the benefits you've already received, but you can withdraw your application and choose to claim at a later date.
If you're past the 12-month mark or can't afford to repay your benefits, you also have the option to suspend Social Security. Once you reach your full retirement age, you can suspend your benefits up to age 70 to then receive larger payments.
When you delay benefits, though, there's not much you can do if you regret your decision. You can't go back in time and claim earlier. While it's still important to choose carefully when determining what age to claim, if you're on the fence, it could be smart to claim earlier. If you change your mind, then, you have more options.
What's the right move for you?
The age you file for benefits is a personal decision, and there are plenty of advantages to delaying Social Security. The higher payments can be a lifesaver in retirement, especially if your savings are falling short. Also, if you expect to live a longer-than-average lifespan, those larger checks can go a long way later in life.
However, delaying isn't the right strategy for everyone. While claiming early will result in smaller payments each month, sometimes that's the best move. Before you claim, make sure you've considered the pros and cons of each option. The more prepared you are, the better off you'll be in retirement.
