Social Security: When’s the Right Time to File for Benefits?

June 11, 2018

When is the right time to file for Social Security benefits? Every retiree faces this question at some point. It’s tempting to file as soon as you become eligible for benefits. However, it’s worthwhile to take time and think about your options. Your decision is permanent. After you file, you can’t go back and change your selection. That’s why it’s so important to make a decision that aligns with your unique needs and goals.

The Social Security Administration uses a few factors to determine your benefit amount. One is your career earnings. Generally, the more you earned during your career, the higher your benefit will be. Another important factor is your age at the time of filing. The older you are when you file, the higher your benefit is likely to be.

Below are descriptions of how filings work at various ages. There’s no right strategy for everyone. Your decision should be based on your unique circumstances. A financial professional can help you decide on the right Social Security strategy for you.

At Age 62

You can file for Social Security as early as age 62, and it may be tempting to do so. If you file at this time or at any time before your full retirement age (FRA), however, you could see a reduction in your benefits.

The amount of the reduction is based on just how early you file. The closer in age you are to your FRA, the lower the reduction will be. If you file as soon as possible, your reduction in benefits could be as high as 35 percent.1

It’s important to remember that these reductions are permanent. You could see your benefit increase in the future because of cost-of-living adjustments, but your benefit will always be lower than it would have been if you’d waited until your FRA to file. Despite the possible reductions, however, filing early may still be the right choice for you, especially if you can no longer work and have no other options for income.

At Full Retirement Age

The best way to avoid benefit reductions is to file at your FRA. If you were born between 1943 and 1954, your FRA is 66. If you were born in 1960 or later, your FRA is 67. If you were born between 1954 and 1960, your FRA is some point between your 66th and 67th birthdays.2

If you file at your FRA, your benefit will be based entirely on your career earnings. There are no reductions or credits based on the timing of your benefit. You can get an estimate of your full retirement benefit from the Social Security Administration.

After Full Retirement Age

You don’t have to file at your FRA. In fact, you could benefit by delaying your filing until a later age. Social Security offers a permanent benefit credit for every year you delay your filing past your FRA.

Social Security will credit 8 percent to your benefit amount for each year you wait. You can delay your filing up to age 70. That means if your FRA is 66 and you wait until age 70, you get four years of credits, for a cumulative increase of 32 percent.3 Again, these credits are permanent, so they could have a big impact on your financial stability in retirement. If you can afford to wait, it may be wise to do so.

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.