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10 Reasons You Should and Should Not Claim Social Security Early

By Kailey Hagen - Jun 26, 2021 at 7:00AM
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10 Reasons You Should and Should Not Claim Social Security Early

Confused about when to sign up for Social Security?

One of the biggest decisions you'll have to make as a senior is when to sign up for Social Security. That choice affects how much money you receive per check, how much you receive over your lifetime, and the quality of life you'll have in your retirement.

It's important to make an informed decision if you want to get the most out of the program. Let's look at a few different scenarios showing when it makes sense to sign up early and when it doesn't.

The $17,166 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $17,166 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

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1. Claim early: You don't think you'll live long

The advantage to delaying Social Security benefits is that your checks increase slightly for every month you wait to sign up after you become eligible at 62. This continues until you reach your maximum benefit at 70.

But if you don't think you'll make it past your 70s due to a health issue, you'll probably get more money overall by signing up immediately. If you wait, you run the risk of not receiving any Social Security benefits if you die before you sign up.

ALSO READ: Social Security: These 3 Questions Can Help You Decide When to Claim Benefits

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2. Don't claim early: You think you'll live a long time

On the other end of the spectrum, people who expect to live to their 80s or beyond will usually get more money if they wait until their full retirement age (FRA) -- 66 or 67 for today's workers -- or beyond to sign up for Social Security.

If you're trying to determine whether delaying will get you more money overall, estimate your lifetime benefit. Create a my Social Security account and use its calculator to estimate your monthly benefit at various ages. Then, multiply these amounts by 12 to get your estimated annual benefits. Finally, multiply these annual benefits by the number of years you expect to claim benefits to figure out how much you'll get overall.

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3. Claim early: You need the money

Sometimes, it isn't possible to delay Social Security benefits even if you'd like to. A job loss, health issue, or family caretaking duties may force you to quit work sooner than you expected. If you don't have enough personal savings, Social Security could be your only choice to make ends meet.

If you're worried about shortchanging yourself, you could try to find other ways to make up for your lost income, like finding a part-time or work-from-home job. Or you could try delaying Social Security by a month or two to boost your checks slightly before you sign up.

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4. Don't claim early: You have plenty of personal savings

If you feel you could fund your retirement entirely on your own if you have to, you'll probably lose more than you gain by claiming early. Funding your retirement on your own for the first few years will enable you to delay benefits. Assuming you live a reasonably long life, as discussed in a previous slide, you'll get more out of Social Security overall by waiting.

Even if you don't need that money yourself, you can still collect these larger benefit checks and pass them onto your heirs once you're gone. They'll also provide you with an extra cushion in case you run into unexpected expenses in retirement.

ALSO READ: Claiming Social Security at 62? 3 Things You Need to Know

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5. Claim early: You're the lower-earning spouse

When both spouses work, they may either claim Social Security on their own or claim a spousal benefit. This is up to 50% of the other spouse's benefit at their full retirement age. The Social Security Administration automatically gives you whichever is higher of the two, but you can't claim a spousal benefit until your spouse signs up for benefits first.

If you believe you'll get more money from a spousal benefit, it could make sense to start claiming right away on your own. Then, when your spouse signs up later, you'll start receiving larger checks automatically. This strategy can also help couples who want the higher earner to delay benefits but cannot afford to do so with just their personal savings. The lower earner can claim right away to generate a source of income for the couple until the higher earner is able to claim their larger checks.

The $17,166 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $17,166 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

Previous

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6. Don't claim early: You're the higher-earning spouse

Those who earn more money over their working lives receive larger benefits. They also stand to lose more money per check by starting early, and they can gain more by delaying benefits. If only one spouse can afford to delay benefits, it should be the one who's earned more over their lifetime, provided the difference is significant.

When two spouses have earned roughly the same amount over their lifetime, they'll probably get the most money overall by both delaying benefits for as long as they can. Use your online Social Security accounts to estimate your spousal benefits and walk through different scenarios to figure out which would get you the most money overall.

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7. Claim early: You're trying to pay off high-interest debt

High-interest credit card or payday loan debt can be dangerous to carry into retirement because there's no limit to how high it can go. It could eat up a large chunk of your retirement savings. That could put you at risk of running out of savings prematurely.

If you want to pay off your debt as quickly as possible, claiming Social Security early and using your checks for this purpose is one option. You may get less money from Social Security overall, but you won't have to worry about making monthly debt payments anymore, so you'll hold onto more of your personal savings.

ALSO READ: This 1 Move Will Guarantee You Larger Social Security Checks in Retirement

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8. Don't claim early: You're still working

You can work and claim Social Security at the same time, provided you're at least 62. But doing so could have some unintended consequences. First, you could fall victim to the Social Security Earnings Test if you're under your full retirement age. This reduces your benefits if you earn over a certain amount. But this loss is temporary. At your full retirement age, the Social Security Administration recalculates your benefit to account for what it previously withheld. Going forward, your checks will be slightly larger.

Working and claiming Social Security could also put you at risk of owing Social Security benefit taxes, though you can owe these even if you're not working. But if you're just living off your retirement savings and Social Security, you're less likely to lose your benefits to the government.

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9. Claim early: You're worried about the future of Social Security

Social Security isn't going to disappear anytime soon, but the program is on the verge of not being able to pay out all the benefits owed. That means benefit cuts are possible in the future, unless the government comes up with some other way to increase funding for the program.

It's impossible to say if or when this will happen, so if you're worried about future benefit cuts, you may prefer to take the sure bet. You could be shortchanging yourself by signing up early. Or you might not be if you lock in your benefit amount now and the government later slashes benefits for those who haven't signed up yet. It really is a gamble either way.

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10. Don't claim early: You haven't worked at least 35 years

No matter what the government does to Social Security, one thing that's probably not going to change is that your benefit is dependent on your average monthly income during your 35 highest-earning years, adjusted for inflation. Those who haven't worked at least 35 years will see smaller benefits due to the zero-income years factored into their calculation. People who have worked for less than 10 years won't qualify for benefits at all.

Making sure you work at least 35 years is one of the easiest ways to increase your benefits. Working past 35 years could also help you because most people earn more later in their careers. Your higher-earning years will gradually start to replace your lower-earning years in your benefit calculation, resulting in larger checks.

The $17,166 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $17,166 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

Previous

Next

Two people sitting on couch and holding hands.

It's ultimately up to you

The scenarios discussed here should give you some food for thought, but when you claim Social Security is ultimately an individual decision. You're the only person who knows your financial situation and your goals for your retirement, so you're in the best position to determine when you should sign up for benefits.

It's good to have a game plan, regardless of your current age. It doesn't have to be set in stone. You can plan to delay Social Security and change your mind later if your circumstances change. Just remember to adjust your personal contributions accordingly so you can still afford your retirement.

The Motley Fool has a disclosure policy.

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