Social Security serves as a critical source of income for millions of retired Americans. Without those benefits, many seniors would simply not be able to cover their bills and get the healthcare services they need.
That's why it's so important to file for Social Security at the right time. While the monthly benefit you'll end up collecting in retirement will hinge largely on your personal wage history, your filing age will also determine how much money you'll get.
In a recent Edward Jones survey, 30% of pre-retirees identified "determining the ideal timing for taking Social Security benefits" as a top financial challenge in the context of retirement planning. And not so shockingly, 31% of current retirees said they faced the same challenge.
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If you're not sure when to file for Social Security, answering these key questions might help you land on the right choice.
1. What do my savings look like?
If you're entering retirement with a nice-sized nest egg, you may be perfectly fine to file for Social Security on time or even early. Filing on time means signing up at full retirement age, which is 67 for anyone born in 1960 or later.
You might even consider taking your benefits early in that scenario, even if it means reducing them in the process. The soonest you can collect Social Security is age 62, though if you're not retiring until your mid-60s, it could pay to wait at least until then.
On the other hand, if your nest egg isn't very robust, it could pay to file for Social Security on time or even later. For each year you delay your filing past full retirement age, your monthly benefit will get an 8% boost. While that incentive runs out at age 70, you have an opportunity to raise your monthly benefit by quite a large sum if you're willing to delay your claim.
2. What does my health look like?
A delayed Social Security filing will give you more money on a monthly basis. It may not give you more money on a lifetime basis, though.
If you pass away at a relatively young age, you might end up shorting yourself on total Social Security income. So if you have any reason to believe you might pass away before reaching your late 70s, then it could pay to claim Social Security on the early side.
3. What do I actually want out of retirement?
Some seniors have fairly simple needs. They enjoy spending time close to home and filling their days by volunteering.
If that sounds like the sort of retirement you're planning, then you may be OK with a smaller Social Security benefit. But if you have loftier goals, then a delayed filing could make more sense. Getting more money each month from Social Security could make it so you're able to do things like travel and enjoy a more active social life.
The decision to claim Social Security is a tough one because it will impact a crucial income stream for the rest of your life. Your best bet, therefore, is to write down the pros and cons of filing for benefits at different ages. If one specific age ends up with the most pros, you may want to run with it.
