Strategizing Your Social Security Benefits: Timing is Key
When it comes to Social Security, choosing the right time to sign up can significantly impact your retirement income. You can start receiving benefits as early as age 62, but waiting until your full retirement age is crucial for getting your maximum monthly benefit.
For those born in 1960 or later, the full retirement age is set at 67.
Image source: Getty Images.
If you choose to delay claiming Social Security beyond your full retirement age, you’ll receive larger monthly payments. For each month you wait after reaching that age up to 70, your benefits increase by 2/3 of 1%.
However, claiming benefits at age 62 can lead to almost a 30% decrease in your monthly payments compared to waiting until 67. Though this reduction may seem daunting, there are compelling reasons to consider early enrollment.
Finding Balance: Income Reduction vs. Peace of Mind
The primary risk of postponing your Social Security claim is the uncertainty of lifespan. If you pass away earlier than anticipated, you could miss out on years of payments by not claiming benefits at 62.
For instance, if your monthly benefit at 67 is $2,000, claiming at 62 would give you $1,400 monthly instead. Alternatively, if you delay until 70, your benefit increases to $2,480.
However, should you pass away at 75, the lifetime benefits received would differ significantly. Starting at 62 would yield $218,400, while claiming at 67 would provide only $192,000, and waiting until 70 would result in $148,800.
Although good health may lead you to expect a longer lifespan, it’s important to account for the potential of an unexpected shorter life. If you desire financial security and want to avoid the risk of missing out on Social Security, claiming at 62 may be the better choice.
Evaluating Your Personal Financial Landscape
Your personal savings also play a crucial role in the decision-making process. If your retirement savings are lacking, claiming Social Security earlier may carry more risk. Should you outlive your expectations, a larger monthly benefit would be essential to maintain your lifestyle compared to withdrawing from a 401(k) or IRA.
If you’ve adequately prepared for retirement, you might decide to claim early, as receiving a smaller benefit each month won’t be financially burdensome and may provide security during uncertain times.
Choosing when to claim Social Security can be complex. Reflect on not just how much you will receive each month but also the influence on your total lifetime income. If accessing benefits sooner brings you a sense of stability, filing at 62 could be the ideal choice.
The $22,924 Social Security Bonus Most Retirees Overlook
Many Americans find themselves behind on retirement savings, yet some little-known strategies regarding Social Security might lead to increased retirement income. For instance, implementing certain tactics could yield as much as $22,924 more annually. Understanding how to optimize your Social Security benefits could be crucial for a stable retirement. Click here to learn more about these useful strategies.
Explore the “Social Security secrets” »
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
