Choosing a filing age for Social Security is one of the most important retirement decisions you might make, right up there with figuring out what Medicare coverage to sign up for and managing withdrawals from your retirement savings. That's because your filing age, coupled with your earnings history, will determine what monthly benefit you get from Social Security for the rest of your life.
The earliest age to claim Social Security is 62. But you don't get your complete monthly benefit without a reduction until full retirement age arrives. Social Security's full retirement age is 67 if you were born in 1960 or later.
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You can also delay Social Security past full retirement age for boosted checks. For each year you hold off, your benefits grow 8% up until you turn 70.
For this reason, 70 might seem like the optimal age to sign up for Social Security. After all, it guarantees you the largest payday each month.
But that doesn't automatically make 70 the right Social Security filing age for you. Here's a good reason to file for benefits well before you turn 70.
What could getting that money sooner do for you?
If your goal is to get the maximum amount of money in your lifetime that Social Security will pay you, then filing for benefits at 70 could make sense.
Granted, it may not make sense if your health is poor and you therefore do not expect to live a very long life. But if you have a reason to believe you'll live until your mid-80s or beyond, then financially speaking, claiming Social Security at 70 could be your best move.
But scoring the highest monthly and lifetime benefit from Social Security shouldn't necessarily be your goal. Rather, you should also ask yourself what that money can do for you.
Your health can be very unpredictable. It may be that at age 62, or 65, or 67, you're in good enough shape to travel and enjoy the experiences you've always dreamed of -- experiences Social Security could help pay for.
But there's no guarantee that come age 70, you'll still be able to do those things. Your health could decline at any time. So if you're in good physical shape earlier in life and you want to take those bucket list trips, you may want to claim Social Security well before 70 -- even if it results in smaller monthly checks.
Of course, there's a caveat. If you're coming into retirement with a very small amount of money in savings, then you may not be able to afford a hit to your monthly benefits. Depending on how small your IRA or 401(k) balance is, you may even want to delay your claim past full retirement age to compensate with larger monthly checks.
But if you've saved reasonably well for retirement, and you're planning to use Social Security mostly for leisure and "extras," then you may not want to force yourself to wait until 70 to get that money. If you do, and your health takes a turn, those benefits may not bring you the experiences they could have several years earlier.
Think things through carefully
It's important to set yourself up for financial stability in retirement. And you may feel that the more Social Security you get each month, the more peace of mind you’ll have.
But before you land on 70 as your Social Security filing age, consider the upside of getting that money sooner. And also, assess your savings. If you've built a $3 million nest egg, why deny yourself extra money that could pay for some big trips you've always wanted to take at an age when you feel up to taking them?
You may decide that filing for Social Security at 70 is the right decision for you after all. The point, however, is to recognize that getting the most amount of money out of Social Security should not necessarily be your only goal. You may want to focus on how to make the most of that money more so than the exact amount you ultimately get.
