Signing up for Social Security is something you may be looking forward to doing. And chances are, once those benefits start rolling in, they'll play a crucial role in your retirement income.
But it's important to make the right call when it comes to claiming Social Security. So before you go that route, make sure you're aware of these key points.
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1. The longer you wait to file for benefits, the more monthly income you'll get
You can sign up for Social Security benefits as early as age 62. But for each month you claim your benefits ahead of full retirement age (FRA), they get reduced on a permanent basis. FRA is either 66, 67, or somewhere in between, depending on your year of birth.
To spin this in a more positive light, for each month you wait to file for Social Security after turning 62, your monthly benefit will get a boost. In fact, you're allowed to delay your Social Security filing past FRA, and for each month you do, your benefits increase by 2/3 of 1%. That amounts to an 8% boost for each year you delay your claim beyond FRA.
Now there is an exception to the "waiting to file always pays off" rule. Once you turn 70, you can no longer grow your Social Security benefits, so there's no sense in delaying your claim at that point. But if you're willing to wait until age 70 to file, the payoff could be huge.
2. Working longer could result in a higher monthly benefit
Some people aim to leave the workforce as soon as they're able to. But if you're earning a higher salary at the end of your career, staying in the labor force a bit longer could really work to your advantage.
Your Social Security benefits are calculated based on your 35 highest-paid years in the workforce. Now many people will have worked for 35 years or longer by the time they reach retirement age.
But let's say you're earning a really high salary at age 67. If you work one more year rather than retire, you can replace a year of lower earnings with higher ones in your benefit calculation. The result? More monthly income from Social Security for you to look forward to -- for life.
3. You can get a peek at your estimated monthly benefit before you start receiving it
You might think you're ready to start collecting Social Security. But what if your monthly benefit isn't as high as you think it is? That could leave you in a precious financial position.
That's why it's so important to see what your monthly Social Security benefit looks like before you claim it. To do so, create an account on the Social Security Administration's website and check out your most recent earnings statement, which should include an estimate of your monthly benefit.
Keep in mind that if you're of retirement age, that estimate should be pretty accurate. It may not account for very recent earnings, but the number you see should be pretty representative of what Social Security will end up paying you. If that number is shockingly smaller than expected, you can make the decision to delay your filing to snag a higher benefit.
Claiming Social Security is something you may be eager to do. But make sure to keep these points in mind and arm yourself with the right knowledge before signing up.
