Once you reach the age of 62, you’ll have a very important decision to make: Sign up for Social Security right away or hold off.
You’re entitled to your full monthly Social Security benefit based on your income history once you reach full retirement age (FRA), which is either 66, 67, or somewhere in the middle, depending on your year of birth. Filing sooner (which you can do starting at 62) will leave you with a reduced benefit, while delaying Social Security past FRA will leave you with a higher monthly benefit for life. And you can grow your benefit via a delayed filing up until the age of 70.
You may be tempted to sign up for Social Security immediately once you become eligible. After all, it’s money you’re entitled to, and you may not want to wait.
But should you file as soon as you can, or hold off for a higher payday? Here’s how to know.
When to take Social Security depends on your savings, goals, and health
Ideally, Social Security will only constitute a portion of your total retirement income. So you can use the amount of retirement savings you have to help guide your filing decision.
If you have, say, $200,000 in your IRA or 401(k), that’s certainly better than nothing. But it’s not exactly a ton of money for what could be a 20-year retirement or longer. So in that situation, delaying Social Security for a higher monthly benefit could make sense. On the other hand, if you’re sitting on a $2 million nest egg, it’s much easier to make the case to claim your benefits whenever you want, even if that means taking them ahead of FRA and reducing them in the process.
Meanwhile, if you have fairly modest plans for retirement, you may not need a ton of income beyond what’s required to pay for basics like food, housing, transportation, and healthcare. So in that case, an early Social Security filing might work out fine for you. But if your goal is to travel extensively, you may want to err on the side of delaying your Social Security claim to snag more money to fund your plans.
Finally, consider the state of your health. This may seem counterintuitive, but if it’s poor, then filing for Social Security on the early side could be your better choice. Doing so will shrink your benefits on a monthly basis. But you might end up with more money in total on a lifetime basis.
On the flipside, if you’re in great health and expect a long retirement because of that, then delaying your filing could be more ideal. Waiting to get benefits could mean getting more money not just each month, but in total.
When to take Social Security is a difficult but important decision
Deciding when to claim Social Security isn’t easy, and there are a lot of different factors to consider when making your choice. But if you focus specifically on your savings level, goals, and health, it might make the process of landing on a filing age much simpler.