As you look ahead to your next act, you might wonder about the role Social Security will play in your retirement income. While the lifetime benefit is unaffected by the market, your benefit amount is influenced by the age at which you retire and begin taking it, so it’s important to choose the optimal time for your situation.
If you take your benefit when you’re first eligible (age 62), it may be reduced by as much as 30%, depending on when you were born. But if you delay to age 70, it may be increased by up to 24% (based on a full retirement age of 67). Full retirement age is the age at which you can receive 100% of your benefits. Keep in mind that full retirement age is based on the year you were born and stands at age 67 for those born in 1960 and later. Delaying Social Security benefits beyond full retirement age can increase benefits, but the gains end at age 70.
When should you file?
So, when should you file to begin taking payments? That depends — but here are four key factors that could influence your decision.
- Life expectancy: How long you (and your spouse) expect to live is a pivotal part of your decision. The longer that is, the wiser it may be to take Social Security later. According to the Social Security Administration, Americans can expect to live an average of 19 to 21 more years after reaching age 65.
- Employment: If you plan to work during retirement and start your benefit before your full retirement age, some of your benefit may be withheld. While that depends on income, if you expect to earn meaningful wages in retirement, delaying your benefit until at least full retirement age may buoy your finances in the long term.
- Need: Do you need the money to support your retirement lifestyle? If so, then you may want to take your benefit when you need it, regardless of other factors. It helps to have a clear picture of your retirement lifestyle and how you want to spend your money. You can start by taking into account how you’d like to use your time. Are you interested in part-time work, spending time with family, or maybe volunteering or traveling? Then think about the financial obligations you’ll have in retirement. The combined picture will give you an idea of how much money you will need.
- Spousal considerations: There are two types of benefits for spouses: spousal and survivor. The spousal benefit can be up to 50% of the other spouse’s full retirement benefit, offset by his or her own full retirement benefit, while the survivor benefit is up to 100% of the deceased spouse’s benefit, or your own, whichever is higher. If your spouse files for benefits early, any potential spousal/survivor benefit available to him or her would also be reduced. Notably, when you decide to file for benefits can also affect your spouse — meaning that if you take benefits early and receive a reduction, your spouse’s survivor benefit would also be permanently reduced.
Monthly benefit by starting age
This chart shows the difference between taking your Social Security benefits early versus delaying. If you were born in 1954 or before and took your benefits early — for example, at age 62 — you might have received only 75% of your benefit. The chart shows that at 66, you would have received your full benefit at 100% and then illustrates how delaying might have given you greater benefits: up to 132% of your full benefit if you delayed until age 70. These figures do not include cost-of-living adjustments.
Source: Social Security Administration (SSA).
Talk with your financial advisor
When to file for Social Security is an important decision. Your Edward Jones financial advisor can help you consider all the factors in light of your overall financial picture. And visit your local Social Security office or www.ssa.gov for more information on your available benefits and options. The decisions you make about Social Security today can have a big impact on your income tomorrow.