If you’re thinking of claiming Social Security benefits this year, you don’t want to move forward with submitting paperwork to the Social Security Administration unless you’re confident in your choice. The decisions you make about your retirement benefits can shape your future, so ask yourself these three questions to ensure you aren’t left with regrets.
1. Will you grow or shrink your standard benefit by claiming now?
Social Security provides you with a standard benefit at your full retirement age (FRA). which will vary depending on the year you were born. For those born in or before 1954, FRA is 66, rising two months a year until age 67 for those born in 1960 or later. The standard benefit is based on average earnings. But you don’t have to start your checks at FRA if you don’t want to.
You can begin getting payments early — as young as age 62 — but your benefit will be reduced for each month you claim it ahead of your FRA. You can also delay your claim, and your standard benefit will increase up until you turn 70.
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Understand how claiming benefits at your current age will affect your payment. Will you get the standard amount or a check that’s higher or lower than that number? This will help you make a more informed choice.
If your FRA is 67 and you claim at age 62, your benefits would be 30% lower than your standard benefit because benefits are reduced by about 6.7% for each of the first three years you claim early and by an additional 5% per year for each prior year. By contrast, delaying taking Social Security will boost your benefit by 8% for each year year up until age 70, when no further increases result from further delay.
You might decide that claiming early for a reduced benefit makes sense if you’re eager to retire or don’t expect to live long enough for a delayed claim to pay off. But you need to know the trade-offs you’re making, because your payment will be permanently reduced due to early filing.
2. Do you have enough sources of support?
Social Security benefits do not provide as much income as you might expect. They’re designed to replace only about 40% of your pre-retirement income, which probably isn’t close to enough money for your retirement. Before you claim benefits, have realistic expectations for how far this money can go.
If you haven’t socked away enough money you may not be ready to claim Social Security. You may want to work longer to bulk up your savings and ensure you’re getting the maximum Social Security check if you’ll be relying on it.
3. Do you understand the impact of your claiming choice on your spouse?
Finally, think about how your decision to claim your Social Security benefits will affect your spouse if you have one because when you die, your spouse becomes eligible for survivor benefits. They can keep receiving either their own benefit or your benefit after you pass away.
If you were the higher earner and delayed your Social Security claim as long as possible, you would leave your spouse with the largest possible survivor benefit. If you claimed early and received a reduced check, though, your spouse would end up with less money to live on.
On the other hand, your spouse may be waiting for you to file to claim the Social Security spousal benefit. They can’t do this until you’ve claimed your retirement check. So if it makes sense for you as a couple to get your benefits started ASAP in order to unlock your spouse’s Social Security income, you may decide that moving forward with a claim in 2023 makes sense.
By answering these three questions, you can make a decision that you won’t regret when it comes to one of your most important sources of guaranteed income as a retiree.
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