Social Security: 3 Signs You Will Regret Claiming Early — And 2 Signs You Won’t
Written by
Jake Safane
Edited by
Gary Dudak
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Social Security benefits can be an important part of your retirement plan, with the average retiree getting $1,862 per month from Social Security, according to the Social Security Administration. However, the age at which you claim Social Security can make a big difference in how much money you receive.
While you can claim Social Security retirement benefits as early as age 62, doing so reduces your benefits by 25%-30% compared to if you waited until your full retirement age, which ranges from 66-67, depending on the year you were born. You can even increase your monthly benefit by 8% per year, for those born in 1943 or later, by waiting to claim Social Security benefits past your full retirement age, up until age 70.
Although the math might get a little confusing at this point and require some calculations, waiting to claim Social Security until at least your full retirement age, if not age 70, can result in significantly higher benefits over the long run.
“For the majority of people, claiming Social Security early would end up being a mistake they come to regret,” said Lea Ann Knight, co-owner and managing partner of financial planning at Better Money Decisions. “If you are able to hold off until age 70, the cash amount on each check will be higher, so you’ll end up receiving more money in your lifetime, just over a shorter period of time.”
However, there can be situations where you’re better off claiming early — here’s a look at both sides.
Signs You’ll Regret Claiming Social Security Early
Keep in mind that the age at which you retire from your career doesn’t have to be the age at which you claim Social Security benefits. So even if you stop working before age 70, that doesn’t mean you should necessarily start claiming Social Security right away.
“While Social Security is designated for retirement, the age you are when you retire from work surprisingly holds little weight in when you choose to opt-in to Social Security benefits,” said Knight.
Consider the following three signs that indicate “your best option is to wait as long as possible to start your Social Security benefits,” she added.
You Have a Strong 401(k) Account
This could mean you have a large enough source of retirement income to hold you over until claiming Social Security benefits at age 70.
You’re in Good Physical Health
The longer you live, the more waiting to claim Social Security benefits pays off. So, if you’re in good physical health and think you can still find plenty of enjoyment as you age, then you might regret claiming early.
Your Spouse Is Also in Good Physical Health
Married couples might make Social Security claiming decisions together, and here, too, if your spouse is in good physical health, you might regret claiming benefits early. Benefits can increase by waiting, and you can have more monthly income to enjoy in your 70s and beyond.
Signs You Won’t Regret Claiming Social Security Early
While the math tends to favor waiting to claim Social Security benefits, ideally until age 70, some people come out ahead financially or prefer the peace of mind that can come from claiming early. Doing so gives you extra years of retirement income, albeit at lower amounts.
“There are really only two scenarios where you should consider claiming Social Security early that wouldn’t come as a regret later on,” said Knight.
You Are Terminally Ill and Uncertain That You’ll Live Beyond 75
If your health stands in the way of receiving Social Security benefits long term, then you could be better off claiming Social Security early and enjoying the benefits for however long you have to live.
You Need Social Security Income To Pay for Basic Living Expenses
Lastly, explained Knight, if you have no other means of paying for basic living expenses, then you might prefer to claim Social Security early. Even though that reduces your benefits, you can at least gain the comfort of having that income source to pay for your necessities, like housing and food.
Analyze What Works for You
While there can be situations where you’ll regret claiming Social Security early, sometimes doing so works out for the best. Thus, it’s important to not take too strict of a view and instead analyze what makes the most sense for your situation.
“Social Security is an extremely helpful benefit for many Americans ready to retire, but what people don’t realize is there is actually a lot of strategy that goes into when you should begin collecting, based on your personal situation,” said Knight.
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