Early or Late: When Should You File for Social Security?

October 11, 2018

If you’re approaching retirement, it’s likely that you’ll have to make a decision about filing for Social Security at some point. Social Security provides income to more than 45 million retirees and their dependents. In fact, 90 percent of those age 65 and older rely on Social Security retirement benefits for income.1

Your Social Security benefit amount is based on a few factors. Your career earnings play a large role, but so too does your decision on when to file. Generally, the earlier you file, the lower the benefit amount. On the other hand, the earlier you file, the more years you’ll receive benefit payments.

There’s no universal right answer on when to file for Social Security benefits. The decision should be based on your own unique needs, goals and objectives. Below are a few guidelines to keep in mind as you decide on when to file:

Filing Early

You can file for benefits as early as age 62. However, any filing before your full retirement age (FRA) is considered early, and you will likely face a benefit reduction. The closer you are to your FRA when you file, the lower the reduction. For instance, if your FRA is 67 and you file at age 62, your benefit is reduced 30 percent. If you file only a year before your FRA, the benefit is reduced 6.7 percent.2

It’s important to remember that these reductions are permanent. If you file early, your benefit never reverts to the full amount, even when you hit your FRA. You may get increases in the future for cost-of-living adjustments, but you’ll always be below the amount you would have if you’d waited until your FRA.

However, that doesn’t necessarily mean filing early is always bad. If you file five years early, that means you get an additional five years of payments, albeit at a reduced amount. If you don’t live long into retirement, it could turn out that filing early was the wiser option.

Filing at Your FRA

Filing at your FRA allows you to get a full benefit. If you wait until the month of your FRA, your benefit amount is based entirely on your earnings and is not reduced. Most people reach their FRA between their 66th and 67th birthdays.3

If you plan on working in retirement, it also may pay to wait until your FRA to file. After your FRA, you can earn as much as you want without seeing a reduction in your benefits. If you file before your FRA and continue working, your benefit could be reduced because of your earnings.

Filing Late

If you want the highest benefit possible, you may want to wait beyond your FRA to file. You can delay your filing all the way to age 70. The Social Security Administration offers an 8 percent benefit credit for every year past your FRA that you wait. For example, if your FRA is 66 and you delay your filing to age 70, you could permanently increase your benefit by 32 percent.4

Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Grand Canyon Planning Associates. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.