Are you thinking about claiming Social Security? These benefits are likely to be an important source of income for you during retirement. And you get to choose when to claim, from as early as 62 or as late as 70 if you want the largest amount of income.
Because your benefits are a valuable retirement asset, you'll want to make the smartest possible choices about when you start receiving them. To do that, you should wait to claim until you see a few green lights suggesting you're good to go.
Here's what they are.
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1. You've worked 35 (or more) years at a salary you're happy with
Your Social Security benefits are based on your wages over the 35 years when your inflation-adjusted salary was the highest. A career history that spans less than 35 years is going to result in lower benefits since Social Security will factor in some years when you made $0 in determining how big your checks will be.
Not only do you want to avoid this, but you'll also want to be sure all 35 years included in your benefits calculation are years when you were happy with your earnings. If you had some periods at the beginning of your career when you didn't make much money, or if you had some years of partial unemployment when your annual salary was really low, you may not want those counted in your benefit calculation.
If that's the case and you're earning more now, you can put in an extra year or two on the job. These years at the higher salary will become part of your calculation, while lower-earning earlier years will be pushed out.
Once you have a 35-year earnings history you're happy with, that's a good sign you're well-positioned to claim your benefits.
2. You know how your age will affect the amount of your check
Remember, you can start Social Security any time after age 62, but how much you receive each month will depend on your claiming age.
The earlier you claim benefits, the smaller your benefit will be. Each month you delay, your payments get a little bigger (until they max out at age 70). So you have to think carefully about whether you want smaller checks for more years or bigger checks later in life.
You can sign into your my Social Security account to see what your benefits will be for the different ages you make your initial claim. Check out those numbers and see how your income would be affected so you can make an informed choice before you get started with your payments.
3. Your benefits are part of a comprehensive plan to support yourself
Finally, you need to realize that Social Security is only meant to replace about 40% of pre-retirement income, so it's a major red light if you're hoping your benefits alone will support you.
If you have other money coming in from retirement investment accounts, a pension, or other sources, and the combined funds are sufficient to cover your needs, then you have the green light to go forward.
Be sure to watch for all three of these green lights and don't claim Social Security until you're sure you're truly ready to make this important financial decision.
