Should You File for Social Security as Soon as You’re Eligible?
Filed under: Social Security Planning
The dilemma of when to file for Social Security retirement benefits can be challenging for many retirees. It’s often tempting to file as soon as you’re eligible at age 62. After all, you’ve paid into the Social Security system for decades. Why not take advantage of the opportunity to finally start collecting on your benefits?
Filing early can be beneficial because it provides you with immediate income that is guaranteed for life. That could provide you with more flexibility and financial stability. However, there are also compelling reasons to delay your filing past age 62 and possibly even past your full retirement age (FRA), which is usually between the 66th and 67th birthdays for most people. Is it better to file early or wait?
The truth is, there’s no one right answer to that question because it depends on your individual circumstances. The best time for you to file for Social Security should be determined by your unique needs and goals.
Whatever you ultimately choose, it’s important to consider your options carefully because you can’t reverse your choice after you file. It may be one of the most important decisions you make with regard to your retirement. Once you decide to file, you can’t change your mind.
Below are a few things you may want to take into account as you prepare to make this major decision:
Do you need income now?
You may want Social Security income now, but do you really need it? Try to differentiate between wanting the extra income now and actually needing it. If you truly have a critical need for the money and have no other income options, this can be a compelling reason to file as soon as possible. After all, there’s little sense in living in a challenging financial situation just so you can get a higher payment in the future.
If you don’t really need the income, however, you may be better served by waiting. The reason for this is that your benefits will increase 8 percent for each year you delay filing after you’ve reached full retirement age. For example, if your full retirement age is 66 and you wait until age 70 to file, you would get an 8 percent increase in benefits for each of the four years that you delay, adding up to a 32 percent increase.1 That increase in payments could be a big boost to your cash flow in the later years of retirement.
Do you expect to have a long retirement?
Of course, to truly benefit from a delayed filing and increased payments, you have to live long enough to receive the payments for many years. You may have reason to believe that you won’t live well into your 80s or beyond. This might be the case if you have a chronic long-term health issue that could shorten your life, such as heart disease or cancer, or a family history of certain ailments causing early death. If you have legitimate reason to believe you have a shortened life expectancy, filing early may be a better option.
However, it may not be wise to make this judgment based on family history alone. Advances in modern medicine are giving people longer lifetimes than ever before. New medicines and medical technology are rapidly developing and evolving every day. Just because your parents or grandparents died early in retirement doesn’t mean you will too.
Are you eligible for a spousal benefit?
Did you have substantially less career earnings than your spouse? If so, you may be able to take advantage of a spousal benefit. That option lets you receive a Social Security benefit based on your spouse’s income rather than your own.
You may be able to take advantage of this option to maximize your benefits. For instance, you could file for your own benefits as early as possible while your spouse delays. Then, once your spouse files, you can switch to the spousal benefit, thereby potentially increasing the amount of your income. You and your spouse may want to consult your financial professional and strategize together to find the best choice for your needs.
Ready to plan your Social Security strategy? Let’s talk about it. Contact us at Ambrose Financial and Insurance Services for more information. We can help you analyze your needs and develop a strategy. Let’s connect soon.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
16440 – 2017/2/15