For the most part, the way to earn Social Security is to pay into the system throughout your career. You may be used to having your wages taxed to fund the program, but that doesn’t mean you need to be happy about it.
Still, the upside is that come retirement, it gets to be your turn to collect those benefits. And it’s important to make sure you’re getting every dollar in Social Security you’re eligible for. If any of these signs apply to you, though, then you may not be getting as much Social Security as you could.
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1. You’re planning to file for benefits early
The earliest age to sign up for Social Security is 62. And you may be inclined to take benefits as soon as possible since, well, you can.
In some cases, an early Social Security claim isn’t a bad idea. But you should know that for each month you take benefits ahead of full retirement age, your monthly checks are reduced permanently.
Social Security’s full retirement age is 67 for anyone born in 1960 or later. If you fall into that category and claim benefits at 62, you’ll reduce your monthly checks by about 30% — for life. So unless you have a specific reason to take benefits early, you may want to hold off.
2. You’re delaying your claim without considering your health
Just as claiming Social Security before full retirement age results in reduced monthly checks, filing for benefits after full retirement age boosts those payments by 8% per year. But a delayed claim isn’t always a savvy move, even though you might assume it is.
Waiting on Social Security really only pays off if you live long enough to make up for years without getting benefits. Think about it this way: If you file at 70 and only live until age 74, you’ll have just four years’ worth of payments, which isn’t enough to make up for the monthly checks you could’ve had starting at 62 or 67.
If you’re not in the best health, it often pays not to delay Social Security past full retirement age. You may even want to file early if you don’t expect to live past your mid-70s.
3. You’re waiting past age 70 to file for benefits
While delaying your Social Security claim does result in boosted monthly checks, that incentive runs out once you turn 70. So if you don’t take benefits by your 70th birthday, you’re basically giving up money for no good reason.
Now if your 70th birthday recently passed and you didn’t file for Social Security yet, don’t panic. Social Security recipients can generally get up to six months of retroactive benefits. So if you turned 70 three months ago, you’re generally not looking at lost money, provided you file as soon as possible.
You need to know the rules and run the numbers carefully
If your goal is to get the most out of Social Security, it’s important to both understand the program’s rules and crunch the numbers before landing on a specific filing age.
It’s not a given that filing early is a bad choice, or that a delayed claim will short you on lifetime income even if your health isn’t optimal. But it’s crucial to understand what different filing ages mean for you financially and to recognize the pros and cons of each choice you have.
You may also want to consult a financial advisor if you’re struggling with the decision. An advisor can help you with the calculations and take your income needs into account so you’re able to devise a more informed filing strategy.
