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When you’re nearing retirement age, you have to decide when you want to claim Social Security benefits. It can be tough to answer this question for many reasons. One of the biggest issues is that the answer may hinge entirely on one very uncomfortable question that you may not want to think about.
Here’s what you need to know to make a fully informed choice about the best Social Security benefits claiming age.
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The key Social Security question that you need to think about when you decide whether to claim benefits is: How long do you think you’re going to live?
Of course, you can’t know the answer to this question. Most people probably wouldn’t want to know, anyway.
But you can make an educated guess by thinking about things like your current health status, whether you have any major risk factors that could point to an early death, and how long your family members have lived.
Thinking about this is undoubtedly uncomfortable, but there is a good reason why you need to consider the answer to this question as you make choices about when to claim your Social Security checks.
It’s crucial to consider how long you think you’ll live as you make your Social Security claiming choice, because that will help you decide whether to claim benefits early or claim benefits late. This is one of the most important choices in your retirement planning process, because there is a huge difference in the amount of your benefits depending on exactly how old you are when you claim them.
If you claim Social Security at your full retirement age, you get your standard benefit. That’s based on your average earnings over the highest-earning 35 years of your career, after wages are adjusted for inflation. A claim before FRA results in a reduction to your standard benefit, and a claim after FRA increases benefits until they can be increased no further at age 70.
If you claim later, you can get a larger monthly benefit, but for that to be the right choice, you have to live long enough to make up for the income you missed out on. If you claim a standard benefit of $2,000 at 62, you’d shrink it to $1,400 — but if you waited until 70, you’d increase it to $2,480. You’d pass up $134,400 in Social Security benefits during the eight years from 62 to 70, but you’d get a monthly check that’s $1,080 bigger later on, so it would take you about 124.4 months or 10.36 years to break even.
If you think you’d live long enough, waiting would be worth it. If you don’t think you would, and you don’t have a spouse who will depend on survivor benefits, you should claim sooner.
So, ultimately, how long you think you’ll live will be a key deciding factor in choosing what Social Security claiming age is right for you. You’ll have to think about the likely answer to that question, whether you want to or not.
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