Before jumping into anything, it can be good to look into whether you're really ready for it. Signs that you're ready for a relationship, for example, may include being comfortable with yourself and being able to compromise. Signs that you're ready to buy a home include having a down payment available and getting preapproved for a mortgage.
There are lots of signs that can help you plan for retirement, too. Here, for instance, are five signs that suggest you're ready to claim Social Security benefits.
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No. 1: You're 62
Let's start with your age. You can start collecting your benefits as early as age 62. Hold on, though, because your "full retirement age" -- the age at which you're able to start collecting the full benefits to which you're entitled -- is 66 or 67, and starting to collect benefits before your full retirement age will shrink those benefits, just as delaying to start collecting them beyond your full retirement age will increase them. Getting smaller benefit checks isn't necessarily bad, though, because you'll get many more checks, in total, if you start collecting early than if you delay.
No. 2: You've worked for at least 35 years
It's also best to have worked for at least 35 years before you start collecting Social Security benefits, because the formula that determines your benefits will average your earnings in the 35 years in which you earned the most (on an inflation-adjusted basis). So if you only work for 31 years, there will be four zeroes in that calculation, bringing down the size of your benefit check.
No. 3: You've checked your earnings record
Don't start collecting your benefits until you've done a little research. At the Social Security Administration (SSA) website, you can set up a "my Social Security" account, and that will let you log in any time, to see estimates of what your Social Security benefits will be, depending on when you start collecting them. You can also look at the SSA's record of your yearly earnings, and if you spot any incorrect information, you can look into fixing it, which might boost your benefits. Knowing how much you can expect to receive from Social Security can help you plan for retirement.
Be sure you're not expecting vast sums from the program, too, because Social Security benefits are not designed to replace most of your preretirement income. The average monthly Social Security retirement benefit was recently $1,519, or about $18,000 per year.
No. 4: You've determined the best claiming age for yourself
Another sign that you're ready to start collecting your Social Security benefits is that you've done the work of figuring out when it's best to start collecting benefits. You need to know how much you can expect to collect each year, and how much total income you expect to need each year in retirement. If, for example, you think you'll need $50,000 per year and you expect to collect $25,000 from Social Security, you need to have saved and invested enough to be able to make up that shortfall, perhaps via dividends, annuities, bonds, CDs, or some combination of various investments.
No. 5: You've strategized with your spouse
Finally, if you're married, don't start collecting your Social Security benefits until you've got a coordinated strategy -- because married folks have lots of those to consider. You might both start collecting at the same time, at a different age for each of you, or you might both wait until you each reach a certain age, or you might be extra strategic about it -- such as having the higher earner delay starting to collect as long as possible to make that benefit as large as possible. That way, when one spouse passes away, whoever survives will be able to collect that larger benefit as their own.
The question of when to retire and when to start that stream of Social Security benefit checks is a very important one, so approach it thoughtfully and carefully. Perhaps even consult a financial advisor, too. You can look up fee-only ones near you at NAPFA.org.
