One of the toughest retirement-related decisions you might have to make is figuring out when to claim Social Security. You're allowed to sign up for benefits as early as age 62. While there's no such thing as a final age to file for benefits, there's no financial incentive to delay your claim beyond age 70. In a nutshell, you're looking at a range of 62 to 70 for taking benefits.
In the middle of that range is age 65, and you may be inclined to file for benefits at that point. But is that a good idea?
Maybe. Here are some pros and cons of taking Social Security at 65.
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Pro No. 1: You'll get benefits for a longer time
You're entitled to your full monthly Social Security benefit, based on your personal wage history, at full retirement age (FRA), which is either 66, 67, or somewhere in between. FRA hinges on your year of birth.
Filing for Social Security ahead of FRA will result in reduced monthly benefits. But you'll also get your money sooner if you first start receiving Social Security at age 65. And that could be advantageous if you don't live a very long life.
While claiming benefits early will slash them every month, it could also lead to more lifetime income from the program by virtue of getting more payments. If your health isn't the best or your parents and grandparents all passed away by their mid-70s, you may want to put in your Social Security claim ahead of FRA.
Pro No. 2: Paying for Medicare may be easier
Medicare Part A, which covers hospital care, is generally free for enrollees. But Part B, which covers outpatient care, charges a monthly premium.
When you're on Social Security and Medicare at the same time, your monthly Part B premiums are paid out of your Social Security benefits automatically. So that's one less bill you have to think about paying. It also means you don't have to worry about being late with a Medicare premium payment.
Con No. 1: Your slashed benefits might negatively impact your retirement lifestyle
The hit your monthly benefit would take by filing at 65 won't be as extreme as the hit you'd face if you claim Social Security at, say, 62 or 63. But nonetheless, you'd be looking at a reduced monthly benefit. And that reduction would amount to somewhere between 6.67% and 13.34%, depending on your FRA.
You might still manage to pay for housing, food, and all of your basics with a benefit that's reduced to that degree. But losing out on that extra Social Security income every month could leave you short on cash to pay for leisure and entertainment and make your retirement less enjoyable.
Con No. 2: You might lose out financially if you live a long life
As mentioned earlier, claiming Social Security ahead of FRA could work out if you don't live a very long life. But if your health is great and you have a family history of longevity, then claiming benefits ahead of FRA could result in less lifetime income from the program.
What's the right choice?
The decision to claim Social Security is a very personal one. If you're not sure if age 65 is the right choice for you, think about the benefits and drawbacks involved. But also think about your personal circumstances.
Is your health strong, or not so much? Do you have a lot of savings, or do you need as much money from Social Security as you can possibly get? Will you be able to continue working at age 65, or is there a chance your company may fold and you'll be stuck either claiming Social Security or taking some low-paying job you hate?
These are the questions you'll want to ask yourself when evaluating any potential Social Security filing age. Spend some time going through them so you'll ultimately land on a decision that works out well.
