Nearly 44 million retired Americans collect Social Security, and for 48% of married couples and 69% of singles, those benefits represent 50% or more of their income. If you’re planning to receive benefits from Social Security, it’s imperative that you file strategically to make the most of that income stream. Therefore, don’t even think about claiming benefits until you’ve answered these key questions.
1. What’s my full retirement age?
Your full retirement age, or FRA, is when you’re allowed to file for Social Security without having your retirement benefits reduced. Remember, those benefits are calculated based on your lifetime earnings, but the age at which you file for them could alter that number, for better or for worse. Full retirement age is either 66, 67, or somewhere in between, depending on the year you were born, but you’re allowed to file for benefits as early as age 62. However, for each month you claim benefits ahead of FRA, you’ll reduce them ever so slightly. File several years ahead of FRA, and you could be looking at a pretty sizable cut.
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Therefore, commit your full retirement age to memory to avoid mistakenly filing at the wrong time. You can consult this table to determine your FRA:
Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.
2. Do I have the option to continue working?
Many people file for Social Security because they need the money to pay their bills. But if you’re able to keep working, it pays to delay retirement benefits as long as you can, up until age 70. For each year you hold off past full retirement age, you’ll accrue delayed retirement credits that boost your benefits by 8% a year. That incentive runs out at age 70, but if your FRA is 67, waiting until then could result in a 24% increase.
Furthermore, if you’re thinking of claiming benefits before reaching FRA but are planning to continue working, you should know that you can collect Social Security and a paycheck from your job simultaneously. However, if your earnings exceed a certain threshold, you’ll have a portion of your benefits withheld. Now once you reach FRA, you can work and collect your benefits without having to worry about that, but if you’ll be working and filing sooner, it’s something to be aware of.
3. Is my health in good shape?
Social Security is technically supposed to pay you the same total lifetime benefit regardless of when you initially file. The logic is that while you’ll reduce your benefits by filing early, you’ll collect a larger number of monthly payments, and if you increase your benefits by filing later, you’ll collect a smaller number of individual payments. That formula, however, assumes that you’ll wind up living an average life expectancy. If your health is poor, however, and you’re not likely to live all that long, then you’re generally better off filing for benefits as early as you can to increase your lifetime payout.
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Imagine you’re entitled to a monthly benefit of $1,600 at a full retirement age of 67. Filing then and living until 82-1/2 will give you a total of $297,600 in lifetime income. You’ll wind up with the same lifetime total if you delay benefits until age 70, because while you’ll boost each monthly payment to $1,984, you’ll receive 36 fewer payments.
But watch what happens if you only live until age 75: At that point, you’ll come out close to $35,000 ahead in lifetime benefits by virtue of filing at 67 and not waiting until 70. Therefore, take your health into account when deciding when to file, and be honest about your life expectancy, even if that means facing some tough realities before you’d like to.
The more strategic you are about claiming Social Security, the more money it’s likely to pay you. Answer these critical questions before filing for benefits so you don’t wind up regretting that decision after the fact.
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