Choosing when to file for Social Security is one of the most important retirement decisions you'll ever make. That's because your filing age will determine your monthly benefit amount.
You're entitled to your full monthly benefit based on your earnings history once you reach full retirement age, or FRA. FRA is either 66, 67, or somewhere in between, depending on your year of birth. However, you're allowed to sign up for Social Security as early as age 62. The problem is that for each month you claim benefits ahead of FRA, they're reduced on a lifelong basis. Still, it can pay to sign up early if the following circumstances apply to you.
1. You need money immediately
Many seniors lose their jobs and struggle to find work again. Others are forced to stop working when health issues -- whether theirs or family members' -- get in the way. If you need money immediately, then you might not have the luxury of contemplating whether claiming Social Security early is a good idea; you'll just need to do it to get by. You're better off filing for benefits and lowering them in the process than racking up costly debt in order to survive.
2. You're not confident in your health
Social Security is designed to pay you the same total lifetime benefit. Filing early will give you less money each month, but more years of benefits, while waiting to file will have the opposite effect -- a higher monthly benefit, but fewer years to collect. You should break even if you live an average lifespan, but if your health isn't great and you don't expect to live all that long, then filing for benefits early could make a lot of sense. Doing so could help ensure that Social Security ultimately pays you the most amount of money.
3. You want to enjoy retirement while you're younger
Many people have more energy to travel or pursue hobbies in their early 60s than in their mid- to late-60s. Filing for benefits ahead of FRA could allow you to really enjoy those experiences while your health permits.
If you don't have much in the way of retirement savings, then you may need to wait on filing for benefits to avoid financial struggles during your senior years. But if you have a healthy nest egg, then it pays to claim your money when it will best serve you.
Filing for Social Security before FRA could work against you -- or not. While it's not always a great idea, in some situations, it makes a lot of sense. Think about your personal circumstances and what signing up early will mean for you. If you take the time to weigh your options, there's a good chance you won't regret your choice.
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