Many seniors find it difficult to figure out when to claim Social Security because there are pros and cons to different options. For example, if you apply for benefits at the age of 62, you will receive your money sooner. But it also means lowering your monthly allowance for life.
Waiting until full retirement age (FRA) means you don’t have to face a cut in benefits. But it also means waiting longer to get your hands on your money. And while applying for Social Security at age 70 means getting the highest possible monthly benefit you can get based on your pay history, it could mean retiring.
Now when you sit down to think about the right age to claim Social Security, you can focus on what your monthly benefit will look like in each scenario. And that’s an important thing.
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But that’s not the only calculation you need to do. It pays to think about how long you expect to live, as that could and should play a role in your decision.
Don’t just fixate on the monthly income
The sooner you claim Social Security, the less monthly income you can expect. But instead of focusing on monthly income, you should also think about lifetime income — the total amount Social Security will pay you over the course of your senior years.
If you end up living a very long life, you may find that, on a lifetime basis, you get the most financially by putting off Social Security as long as possible. On the other hand, if you end up short of living, filing early may be your best bet.
Of course, you can’t definitively predict how long you’ll live because, well, nobody has that ability. But you can make an informed guess based on your health and your family history.
If you’re in your early 60’s and in great shape with no known issues, and your parents are still in their 90’s, there’s reason to believe you’ll have a longer life. On the other hand, if your health is already declining at age 62 and your parents and grandparents all passed away in the early 1970s, you may want to anticipate a shorter lifespan and use that to guide your Social Security application decision. .
Here’s just one example of how life expectancy calculations can work. Let’s say you think you’ll live to age 85. If you’re entitled to a monthly Social Security benefit of $1,700 at an FRA of 67, and then you sign up, your total lifetime payout will be $367,200. If you apply at age 62, your total payout will be $328,440. And if you apply by age 70, your total payout will be $379,440. So in this case, deferring your claim to 70 actually makes the most sense.
These numbers look different if you assume that you will only live to 75 years. In that case, filing with FRA will net you a lifetime payout of $163,200. If you deposit at age 62, you will be left with $185,640, and if you file at age 70, you will get a lifetime total of $126,480. So in this case, filing at age 62 is the best choice.
An important factor to consider
Determining your own lifespan is not easy. But it’s important to do this before claiming Social Security. That way, you’ll be in a better position to get the most lifetime income – even if it means making less money each month.