Deciding when to apply for Social Security benefits is one of the biggest decisions you’ll make, so it’s important to choose carefully.
Rushing that decision and making a claim before you’re ready could cost you the road. On the other hand, if you wait too long to apply for benefits, you may regret not applying sooner.
There is no one-size-fits-all answer to when you should make claims. But there are a few signs that you’ve done your homework and are ready to apply for Social Security now.
1. Your savings are in good shape
Social Security benefits are only intended to replace about 40% of your pre-retirement income. That means if you can’t drastically reduce your expenses after retirement, you’ll need another source of income to make ends meet.
Exactly how much you should have saved depends on a variety of factors, including your future spending and how many years you expect to spend in retirement. Your desired retirement lifestyle might also affect your spending, and you might increase your spending after you retire.
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If you don’t know how much you should save, or if you expect Social Security to be your only source of income, it may be wise to hold off on applying for the time being.
2. You know how your age affects your level of benefit
The age at which you claim benefits directly affects how much you collect each month. If you claim at your Full Retirement Age (FRA) – either 66, 66 and a few months or 67 years old depending on the year you were born – you will receive the full amount of benefit to which you are entitled based on your proof of employment.
If you make a claim before your FRA (already aged 62), you will receive a reduced amount. By deferring benefits, you earn a bonus for each month you wait until age 70. In theory, you can defer benefits beyond age 70, but it won’t make you extra money every month.
The age you state is a personal choice and there isn’t necessarily a right or wrong answer. But knowing how that age will affect your monthly payments will make planning for retirement easier.
3. You have a strategy with your spouse
If you’re married and your spouse is also eligible for Social Security, it’s a good idea to come up with a strategy for when each of you will claim.
For example, you can choose to submit concurrently regardless of your age. Or maybe one of you will complain earlier while the other will delay. That way, you can make some extra money earlier in your retirement while still taking advantage of the bigger checks you get from deferring.
While it may not be pleasant to think about, it is wise to consider both lifespans. If one spouse dies, the other may be entitled to the entire amount of the deceased person’s pension in survivor’s benefits. If you have reason to believe that one of you will outlive the other, it might be a good idea to consider the role of survivor benefits in your strategy.
Deciding when to apply for Social Security can be difficult, but the better prepared you are, the better off you will be in retirement. Once you have these three factors in mind, you may be able to start applying for Social Security as soon as possible.
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