One of the most critical decisions you’ll have to make as you near retirement is when to start claiming Social Security benefits.
The earliest you can file for benefits is at age 62, and it’s also the most common time at which people begin receiving them.
According to a 2020 report from the Bipartisan Policy Center, approximately 35% of men and 40% of women apply for Social Security benefits at the age of 62.
In some cases, it makes sense to file for benefits sooner rather than later, but you should be aware of the risks.
Be aware of a few rules before filing an early claim, as they may have an impact on the number of benefits you receive in the future.
1. Your Benefits Won’t Increase Later
You’ll get smaller monthly benefits payments if you apply for benefits as soon as possible. However, a common misconception is that once you reach your full retirement age, which is 67 for those born after 1960, you will begin receiving larger payments.
After submitting a claim, your monthly benefits are generally guaranteed for the rest of your life (save for annual cost-of-living adjustments).
Consequently, it is imperative to plan ahead when deciding on the appropriate claim age. Consider delaying benefits for a year or two if you’re expecting a benefit increase later in life and want to collect larger monthly payments. You could also take steps to increase your savings so that you don’t rely on Social Security as much.
2. Your age could affect your spouse’s benefits in the future
To determine how much your spouse will get in benefits in the future, it is important to file for benefits as early as possible.
In this case, the surviving spouse may be able to receive all of the deceased spouse’s survivors benefits if one of you dies before the other one does.
A surviving spouse can receive these benefits, but their benefit must be less than the deceased spouse’s benefit in order to qualify. There will be only one survivor benefit, and it will be higher than the other.
For example, if your monthly benefits are $2,000 and your spouse’s are $1,500, you and your spouse would each receive $1,500 per month.
Rather than $3,500 per month, your spouse would receive $2,000 per month in survivors benefits if you died and were to leave a will.
If you believe your spouse may outlive you, think about how your age on the application could affect the number of benefits he or she receives. If you file your claim earlier, you will receive smaller payments, and your spouse may not be eligible for survivors’ benefits if you die before them.
Should you claim benefits early?
While it may not be the best option for everyone, filing an early claim can be a wise choice in certain situations.
Delaying benefits, for example, can give you a head start on retirement if you have a solid retirement fund and don’t necessarily need the extra money you’d receive each month by delaying benefits.
Aside from that, claiming your Social Security benefits early can give you more time to enjoy retirement if you’re dealing with or anticipate having health issues in the future.
You’re not the only one who plans to claim Social Security benefits early. Make sure you’re aware of how these two rules could affect your monthly payments before making this decision.
You can avoid any Social Security surprises and maximize your benefits by preparing for retirement as thoroughly as possible.