When Should You File for Social Security?

Questions about Social Security come up frequently in our financial planning conversations with clients. It’s a complex issue with many angles to consider, but we’d like to look at four key factors you might evaluate in deciding when to file for your Social Security benefits.

1) Your Full Retirement Age (FRA). Your FRA is the age when you are eligible to receive your full Social Security benefits. Your birth year determines your FRA. If you were born between 1943 and 1954, it is age 66. For those born between 1955 and 1960, FRA increases by two months a year (so for someone born in 1956, it would be 66 and four months) up to age 67 for people born in 1960 or after (see the “Age to Receive Full Social Security Benefits” table for a full breakdown).

You want to know your FRA because benefits are reduced or increased if you file before or after reaching it. Age 62 is the earliest you can file, and benefits top out at age 70 (there is no advantage to filing after age 70).

If you file before your FRA, your benefits will be permanently reduced by 8% per year.

On the other hand, every year that you wait to file beyond your FRA results in an increased benefit of 8% per year—and that amount lasts for the rest of your life and that of a surviving spouse. Check out this tool to figure out your FRA.

2) Your Benefits. The Social Security Administration (SSA) mails a statement to all workers three months before their 60th birthday that shows what their estimated monthly benefits are likely to be. (The SSA used to send statements to all taxpayers every year, but they stopped in an attempt to cut costs.) And you can also create an account at www.ssa.gov to review your benefits at your convenience. We suggest doing this sooner rather than later to help you with your retirement-income planning.

3) Your Career Plans. If you are still working and file for benefits, you may see those benefits reduced, particularly if you haven’t reached your FRA. Believe it or not, they could be cut by as much as $1 for every $2 you earn above $17,640 per year. So if you plan to continue working and you haven’t hit your FRA yet, you may want to hold off claiming any benefits for now.

4) Your Family Health History. Life expectancy plays a large role in calculating your optimal filing time. While you get an 8% increase in your benefits for every year after your FRA that you delay, the sum of all benefits received by waiting until age 70 often won’t exceed what you’d tally by filing earlier unless you live into your late 70s or early 80s. However, delaying benefits to lock in that yearly increase does provide a form of longevity insurance for those who anticipate a long, healthy retirement.

There is much more to say on Social Security that you’ll see in future FPF posts. You can also read our special report, Social Security’s Role in Your Retirement, and listen to our “When Should You File for Social Security?” podcast episode.

In the meantime, please give us a call at (800) 492-6868 if you have any questions about your own Social Security decisions or any of our financial planning services.