Social Security serves as a major income source for millions of retired seniors, and unless you’ve really saved a bundle, chances are you’ll end up relying on those benefits in retirement as well. Now you’ll often hear that it’s best to avoid filing for Social Security early, because doing so winds up reducing your benefits. And that’s definitely some solid advice. Whether it actually pertains to you, however, is a different story.
Social Security: Your filing age matters
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Your Social Security benefits are calculated based on your 35 highest-paid years of earnings. The age at which you file for them, however, will dictate whether that number goes up, goes down, or stays the same. If you file at full retirement age (FRA), you’ll get the exact monthly benefit your earnings record renders you eligible for. FRA is based on year of birth, as follows:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 |
67 |
That said, you’re allowed to start claiming benefits as early as age 62. And while you can technically file at any age after that, 70 is generally considered the latest age to sign up for benefits, since there’s no financial incentive to wait past that point. Delaying benefits past FRA will boost them by 8% a year up until age 70 is reached, while filing ahead of FRA will reduce them by 6.67% a year for the first three years they’re taken early, and 5% a year after that. That might sound complicated, but it means that if you’re looking at an FRA of 67 and you file at 62 instead, your monthly benefit will be reduced by 30%. And unless you undo your filing within a year and repay the benefits you collected, that reduction will remain in effect for the rest of your life.
As such, seniors are often advised not to sign up for a lifetime of lower benefits. But the reason you might want to do so anyway could come down to one important thing: avoiding boredom early on in retirement.
Keeping your spirits up
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Retirees are 40% more likely to suffer from clinical depression than workers, and the reason often boils down to feeling bored and restless. Furthermore, workers don’t always get to retire when they want to; an estimated 60% are forced into early retirement due to reasons such as getting laid off or being physically unable to continue working. As such, it’s not uncommon to land in a situation where you’d rather be working, but can’t, yet don’t have the money in savings to entertain yourself adequately.
Enter Social Security. While claiming those benefits early will reduce them, you might consider doing so an important investment in your mental (and, to an extent, physical) health. And if that’s the case, losing out on a few hundred dollars of income per month might be a reasonable price to pay for the ability to avoid getting depressed early on in retirement.
Of course, this strategy only works if you have a decent amount of money saved for your golden years. If you don’t, then you’ll need every cent you can collect in Social Security to pay your basic living expenses. But if you’ve saved enough to cover the basics, and filing early allows you to enjoy retirement rather than resent it, then going that route might make sense after all.
When it comes to picking an age to claim Social Security, there’s no right or wrong answer. Though waiting until FRA will help you avoid a reduction in benefits, filing early might give you the money you need to make your days more satisfying. And that’s reason enough to consider getting your hands on that cash sooner.
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