Social Security benefits can have a major impact on your retirement. Many retirees will rely on their monthly checks for a significant amount of income during their senior years, so choosing the right time to claim is critical.
There is no one-size-fits-all approach to claiming Social Security. Some people may do better to claim earlier in life, while others may benefit from waiting a few years. Regardless of your age, however, there are a few signs that you may be ready to claim benefits next year.
1. Your savings are on track
Social Security benefits can help make ends meet when you retire, but they are only meant to replace about 40% of your pre-retirement income. Unless you have other sources of income, you probably still need a significant amount of savings to comfortably enjoy your retirement.
Exactly how much savings you need will depend on many factors, including the number of years you expect to retire and your future retirement costs. If you haven’t already, it’s a good idea to calculate your retirement savings goal to estimate how much you need.
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If you’re short on savings, it may be a good idea to work through a few more years to build your retirement fund. But if your savings are on track, you may be ready to start claiming Social Security.
2. You know how your age affects your benefit
The age you apply for Social Security has a direct effect on the amount you receive each month. If you claim earlier (at the age of 62), you will receive up to 30% less benefit each month. By postponing a benefit (up to the age of 70), you will receive up to 32% extra monthly on top of your full benefit.
There isn’t necessarily a right or wrong answer on what age you should claim, but it’s important to understand how your age affects your checks.
For example, if you know money will be tight in retirement, consider whether it might be worth deferring benefits and earning bigger checks. Or if you plan on applying for benefits as early as possible, make sure you understand how that will affect your retirement income.
3. You have mapped out a strategy with your partner
If you are married and your spouse is also entitled to Social Security benefits, it may be helpful to devise a strategy for when each of you should be entitled.
In some cases, for example, it may make sense for the less-earning spouse to apply for benefits early, while the higher-earning spouse defers Social Security. This way, the two of you have some extra income in early retirement, but you can also take advantage of those bigger checks later in life, when your savings may be running out.
If one spouse dies first, the other may also be entitled to the full amount of the deceased spouse’s survivor benefits. If you have reason to believe that one of you is likely to outlive the other, it may make sense for one spouse to defer Social Security so that the surviving spouse can collect more in survivor benefits. While this topic may not be pleasant to think about, the right strategy can result in a much higher benefit later in life.
Social Security benefits can help you enjoy a more financially secure retirement, but choosing when to file a claim is a decision not to be taken lightly. Taking these steps to make sure you’re ready to file will help you retire in the best possible way.
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