The decision to enroll in Medicare is somewhat simple. If, come age 65, you're not covered by a group health plan through your job, then it makes sense to sign up for Medicare to put health coverage in place.
The decision to file for Social Security, on the other hand, is a pretty complicated one. That's because unlike with Medicare, there are multiple Social Security filing ages you can choose from, and each choice comes with consequences.
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You're technically allowed to sign up for Social Security at any point once you turn 62. But because there's no financial incentive to delay a filing past age 70, 70 is often regarded as the latest age to sign up.
If you claim Social Security at age 62, your monthly benefit will be permanently reduced. On the flipside, filing at age 70 will give your benefit a permanent boost.
While these aren't the only two options you can choose from, you may feel pulled in both directions in the course of deciding what to do with your benefits. But there's one important factor you'll need to take into account if you're torn between a Social Security claim at age 62 versus 70.
How's your health looking?
One funny thing about Social Security is that the program is designed to pay you the same total lifetime benefit regardless of when you sign up. The logic is that an early claim at 62 will shrink your monthly benefit, but you'll collect that benefit for longer. A delayed filing will raise your monthly benefit, but you won't collect it for as many years.
Things should all even out if you live an average lifespan. It's when you pass away at a relatively early or late age that things become trickier. That's why in the course of your Social Security filing decision, it's extremely important to consider the state of your health.
If your health is great doing into retirement, then a delayed filing could put more money in your pocket from Social Security overall. But if your health is poor, then it generally pays to claim Social Security on the early side to come away with the most lifetime income.
The numbers really do work out
Let's say you're eligible for a monthly Social Security benefit of $1,900, which is close to what the typical recipient gets today. If you sign up for Social Security at age 62, your monthly benefit shrinks to $1,330. If you delay until 70, you boost that payment to $2,356.
At age 75, you'll have received a total of $207,480 in Social Security benefits with a filing at 62. At age 70, you'll have only gotten $141,360 -- a difference of over $66,000. So if you're someone with poor health in your early 60s, it could pay to sign up for Social Security as soon as you're eligible to do so.
On the other hand, let's say you end up living until age 90. Here, signing up for Social Security at age 62 gives you a total of $446,880 in benefits, compared to the $565,440 you'd get with a filing at age 70. That's a difference of over $118,000. So if your health is fantastic in your early 60s and your parents lived long lives (or are still alive), then it could easily pay to wait on your claim.
All told, it's tough to nail down the perfect Social Security filing age. Your best bet may really be to think about how healthy you are and use that as a guideline. From there, you can also consider additional factors, like the amount of retirement savings you have, to guide your decision.
