The largest retirement decision you may have to make is deciding when to claim Social Security benefits. The monthly amount that you get from the program will depend on both your filing age and your personal income history, which will be the basis for calculating your monthly benefit. When you hit full retirement age, you are entitled to your entire monthly payment based on your salary history (FRA). Your age depends on the year you were born, however, if you were born in the year 1960 or later, the answer is 67.
Postpone Filing Your Social Security
In the meantime, you can apply for Social Security as soon as age 62. On the other hand, your monthly benefit is permanently decreased for every month you file before FRA. On the other hand, your monthly benefit increases for each month that you postpone filing your Social Security request after FRA. And until you turn 70 years old, you can keep delaying your filing and increasing that advantage. Beyond that, you actually won’t be compelled to re-register until you turn 70, so there’s no reason to put off filing your claim.
If you want to receive the maximum monthly income, you might be tempted to apply for Social Security around the age of 70. But there is a risk involved. If you put off filing for Social Security long enough, you may miss out on lifetime benefits if you live a short life. However, it makes sense to think about registering for Social Security at the age of 70 if you anticipate living into the age of 82 1/2. Finding your break-even point is crucial when choosing between two distinct Social Security filing ages. You should also be aware that your break-even threshold is 82 1/2 years old while deciding between 67 and 70 years old. Assume you meet the requirements for a $2,000 every month Social Security benefit at an FRA of 67. If you sign up after the age of 70, the benefit will increase to $2,480.
Lower Monthly Benefits
Whether you register at age 67 or 70, your lifetime Social Security payment will total $372,000 when you reach age 82 1/2. Recall that the rationale is that claiming at age 67 entitles you to 36 additional months of benefits while claiming at age 70 results in lower monthly benefits but larger total payouts. Now, it’s obvious that you can’t precisely forecast the duration you’ll live without a crystal ball. But suppose you are in good health and are getting close to 67 years old. Assume, furthermore, that both of your parents are in their 90s and that their parents are as well.
If so, it could be reasonable to assume you will live beyond the age limit of 82 1/2. If that’s the case, your best option would be to apply for Social Security until age 70, as this could potentially result in a larger lifetime benefit. Indeed, according to the aforementioned example, if you enroll in Social Security at age 70 but live to be 83, you will receive an additional $2,880 in lifetime benefits due to your delayed filing as opposed to if you enroll at age 67. You will receive an additional $14,400 through Social Security if you live to be 85 years old. Additionally, it will mean an extra $83,520 if you live to be 97 years old.