Social Security gives you lots of choices when it comes to filing for benefits. The earliest age to claim Social Security is 62. But you're not entitled to your full monthly benefit based on your earnings history until full retirement age (FRA) arrives. FRA is either 66, 67, or somewhere in between, depending on your year of birth.
You can also delay your Social Security filing past FRA. For each year you do, your benefits get an 8% boost.
You can only grow your benefits until the age of 70. So while you're not forced to claim Social Security on your 70th birthday, there's no reason not to.
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But delaying your filing until age 70 will boost your benefits by a minimum of 24%. And that's an increase you'll get to enjoy throughout your retirement.
Clearly, a delayed Social Security claim could improve your financial picture substantially. But while you might plan to postpone your Social Security filing, things may not work out the way you expect them to. So it's important to focus on building savings, too.
When a delayed filing just isn't meant to be
Delaying Social Security should be a snap when you're able to continue working beyond FRA. But what if that isn't the case?
What if you run into health issues in your 60s that force you to file for Social Security at FRA or even before? Or what if your company downsizes you out of a job around FRA, and you can't find another one? At that point, you might have to claim Social Security right away and forgo the boost to your benefits you initially wanted.
While it's a good thing to try to delay your Social Security claim, you can't assume you'll be able to pull that off. So it's important to work on building retirement savings in case you don't wind up with a higher monthly benefit. That way, you're less likely to get hurt financially if you wind up having to claim Social Security at an earlier age than you'd like.
Furthermore, if you have a lot of savings, tapping your nest egg might allow you to delay your Social Security claim. Let's say you lose your job at age 67 and that's your FRA. You may decide you really want to try to delay Social Security one more year so you can snag an 8% guaranteed boost to your benefits. If you have a nice amount of savings, you might be able to take withdrawals for a year to make a delayed filing possible in this scenario.
All told, filing for Social Security beyond FRA could do a lot of great things for retirement -- as well as your peace of mind. After all, there's something to be said for knowing you're guaranteed a higher monthly paycheck throughout your retirement.
But make sure you're building savings as a backup in case your plans to delay your filing fall through. The last thing you want is to bank on a higher monthly benefit throughout retirement only to get stuck with a lower one -- and little money in savings to compensate.
