When you file for benefits will have major implications for your finances in retirement, but there’s no one-size-fits-all answer to this question.
Determining when to begin claiming Social Security is a big decision, as it will affect your monthly income for the rest of your retirement.
The earliest you can file for benefits is age 62, but doing so will result in a reduction of 30% in your monthly benefits. This reduction is permanent, too, so it’s not a decision to be taken lightly.
With everything going on right now — from surging inflation to falling stock prices to concerns about a recession — is it still a good idea to file for Social Security at 62? Or should you hold off a few years and collect larger checks?
When it makes sense to wait
While it’s not always ideal, sometimes waiting a few years to retire and claim Social Security can be the best decision. This is especially true if your savings and investments are falling short.
The longer you wait to begin claiming benefits (up to age 70), the more you’ll receive each month. In some cases, this can amount to several hundred dollars more per month, which can go a long way in retirement.
For example, say that your full retirement age (according to the government) is 67 years old, and the full retirement benefit you would be due at that age would be $1,600 per month. If you were to file at 62, your benefits would be reduced by 30%, leaving you with $1,120 per month.
However, if you were to delay filing for benefits until 70, you’d receive 124% of your full benefit amount, giving you a total of $1,984 per month. That’s a whopping $864 more per month than you’d collect at age 62.
While nobody can know what will happen next with the stock market or the economy, if stock prices continue to fall and we face a recession, your retirement fund could lose value in the short term. If your savings are already falling short, waiting a few years to earn those bigger checks could make it easier to weather periods of volatility in the future.
When you may be better off claiming early
Yet delaying benefits isn’t the right move for everyone, and sometimes it can be smart to file as early as possible.
If you have reason to believe you may have a shorter-than-average lifespan, for example, you could receive more from the Social Security program over the course of your retirement by filing early. Each check will be smaller compared to what you’d have received if you’d delayed taking benefits, but you’ll receive more payments in total.
Of course, nobody knows exactly how long they’ll live, and thinking about your life expectancy isn’t the most pleasant activity. But delaying benefits essentially involves betting on your longevity, and if you’re not sure you’ll live into your 80s or beyond, it could pay to file for benefits earlier.
Claiming sooner could also be a smart move if you’re forced into an early retirement due to job loss or health issues. You don’t necessarily have to apply for Social Security as soon as you retire, but having that extra source of income could help you avoid draining your retirement savings too quickly.
Which is the best strategy for you?
Whether you should claim Social Security at 62 or wait a few years depends largely on your personal situation. If your savings are falling short and you know you’ll need to depend heavily on Social Security in retirement, you may be better off waiting a few years to file. Especially as inflation surges and retirement becomes more expensive, those larger checks may go a long way.
On the other hand, if you’ve built a robust retirement fund or if you have no choice but to retire early, claiming Social Security as early as possible could be a smart move. While you will receive smaller checks, sometimes that’s a worthwhile trade-off.
There’s not necessarily a right or wrong answer as to when you should claim Social Security. Despite rising inflation and market volatility, claiming early isn’t always a bad move. Just be sure you’ve weighed the pros and cons carefully as you decide whether it’s the right option for you.