For most retirees, this is the million-dollar question, isn’t it? If we all had a crystal ball, the decision on when to file would be far easier. But the reality is that there are many factors that you should consider to make an informed decision.
Whether you file as soon as you’re eligible at age 62 or wait until as late as age 70 to earn delayed retirement credits, one thing remains certain: There’s no one-size-fits-all approach to the decision. Let’s talk through some factors that you may want to consider prior to making the decision about when to file.
Factor 1: Your Retirement Income Sources
Before you can make a decision about when to file for Social Security, it’s important to have an idea of how much income you’ll need in retirement, and where it’s going to come from. If Social Security is going to represent most of your retirement income and you have limited income from other sources, you might consider options to enhance your retirement income. Could you continue to work, even part-time? If continuing to work isn’t an option or you don’t have other sources of post-retirement income such as a pension, savings, or IRA, filing as soon as you retire may be the right choice for you.
If you have other sources of retirement income, it may be a good idea to meet with a financial professional. They can help you explore your options to make the most out of your Social Security benefits in conjunction with those other sources of income.
If we all had a crystal ball, the decision on when to file would be far easier.
Factor 2: Your Marital Status
If you’re single, your decision on when to file for benefits is one that affects only one person—you. But, if you’re married, your decision on when to file could also affect your spouse if he or she outlives you. For example, let’s assume that you’re the primary wage earner in your marriage and have an estimated benefit at FRA that exceeds your spouse’s benefit. If you file at age 62, opting to collect a reduced benefit could adversely impact your surviving spouse, because when one spouse dies, the lower of the two Social Security benefits is replaced with the higher monthly benefit.
While some mistakenly believe that the surviving spouse will continue to collect his or her own benefit plus the survivor benefit, this is not the case; only the higher of the two monthly benefits is paid to the survivor. Often, this means that the surviving spouse is faced with the challenge of living on less income. If the higher-earning spouse files at FRA or later, even at age 70, the surviving spouse can collect a higher survivor benefit than if the higher-earning spouse filed earlier. This can help replace a higher portion of his or her income as the survivor, and put less of a strain on other sources of retirement income.
Factor 3: Your Health
If you have compromising health conditions or have a family history of the same, you may want to consider filing earlier rather than later. If, for example, the average person in your family lives to age 75, filing at age 62, even though your benefit would be reduced, may allow you to collect more cumulative benefits than if you file at your full retirement age (FRA) or even later. But, if you defy the odds and live longer, say to age 85, then the decision to file early may result in lower cumulative benefits than had you waited a bit longer to claim.
The closer you get to your FRA, the more of your Primary Insurance Amount (PIA) that you will collect. Your PIA is the equivalent of 100 percent of your benefit at FRA. Also keep in mind that, for every month you wait beyond your FRA, you will earn a monthly delayed retirement credit, up to 8 percent per year, until you reach age 70 (or if earlier, or until the date you file for benefits).
Your decision on when to file for Social Security is as unique as you are. Because the variables to consider differ for almost everyone, it may be a good idea to contact a financial professional who can help you navigate your way to an empowered retirement and help you decide when to file for Social Security based on your situation and goals.
We are not affiliated with the Social Security Administration or any other governmental agency.