Claiming Social Security is a hard decision to undo. You'll typically be stuck with your choice once you have filed for benefits unless you rescind your claim within the first 12 months and pay back all you've received.
You don't want to start getting checks until you are sure you're ready. If you're uncertain of whether it's time, watch for these three green lights that suggest claiming now could be a good financial move.
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1. You've worked at least 35 years
You need at least a 10-year work history to be eligible for Social Security benefits on your own record. But the actual amount of your benefit is based on average earnings in your 35 highest-earning years. The Social Security Administration adjusts your wages for inflation and gives you benefits equaling a percentage of your inflation-adjusted income in the 35 years you earned the most.
If you have not worked for that duration of time, your benefits are still based on average earnings over a 35 year span. That means some years your earnings would be $0, so your average would be lower. You don't want to shrink your benefit with $0 wage years if you don't have to. In fact, if you are earning a lot more money now than you did in the past, you may want to work a year or two longer so some higher-earning years can replace lower ones.
On the other hand, if you have 35 years of solid earnings that you're happy with, this is a green light to claim benefits.
2. You have a plan to supplement your benefits
Social Security benefits alone aren't going to provide enough money to maintain your standard of living -- or anything close to it -- without additional money coming in. So before you claim benefits, be sure you have a plan to get additional money from somewhere.
You can claim Social Security and keep working if you want to. But, if you are under your designated full retirement age, you are limited in how much you can earn before you begin forfeiting some of your Social Security checks. So, don't count on always being able to double dip and get a paycheck and benefits unless you've already reached FRA.
Ideally, you'll have a good amount of retirement savings to supplement Social Security before you claim. Your benefits replace about 40% of your pre-retirement income and you'll need to replace about 70% to 90%, so your savings should provide the money to do that while maintaining a safe withdrawal rate (which, for most people, is around 4% of your investment account balance or less).
If you have a plan for where your extra money will come from to supplement Social Security, this is a green light to claim benefits.
3. You understand how your claim will affect your monthly benefit amount
Finally, you shouldn't claim benefits if you don't understand how your decision will affect the amount you actually receive.
You are allowed to claim benefits starting at 62, but your designated full retirement age is always later than that -- as late as 67 for anyone born in 1960 or later. Any month you've started checks before FRA will result in a reduction of your monthly payment. If you file for benefits at exactly FRA, you will get your standard benefit. And if you wait beyond that, your benefit will increase each month until 70.
Be sure you know how much you'll get based on your age when you claim benefits and consider carefully whether you'd rather have more checks at a younger age with each payment being smaller, or fewer checks that start later but are larger.
If you have a clear understanding of how much your benefits will be, how you'll support yourself, and how your decision affects your retirement income, then you're ready to claim your Social Security checks.
