Posted by Abundant Wealth Planning LLC

When is the Best time to claim social security benefits?

When is the Best time to claim social security benefits?

The Ideal Age in Filing for a Social Security

Determining the perfect time to file for Social Security is not easy. You will get your money sooner if you file early but as a result, it will cut your monthly payments. If you file at your full retirement age, your benefits will not be deducted, but you cannot claim your benefits early. Your benefits will boost up if you file for Social Security after full retirement age but you will have to wait even longer for your benefits to hit your bank account.

Therefore, what is the right age in filing? Let us run through some options.

Claiming at 62 years old

The earliest and the most popular age to start filing is at 62 where you can start collecting Social Security. The greatest favor you will get from claiming at this age is that you will get hold of your money as early as possible. This will help you in paying your travel expenses, bills, or use the amount in any way you want. You will also have the opportunity to take benefits early and have invested them so that your money multiplies. If you think of investing your money, however, don’t forget that investing money has the risk of taking losses whereas waiting to collect Social Security guarantees a continuing larger monthly payment.

Assuming you decided to file early for Social Security and invest the money in stocks. You may possibly see an average annual return of 9% if the market is doing well and with its historical average it is roughly in line with. Hitting at an average annual return of 9% may be worthwhile if assuming your loss in benefits is only 6.67% every year for the first three years you file early and in the year thereafter is only 5%. But remember that over the course of decades, a 9% return is a far more achievable result rather than a few years. You may possibly at worst lose money or just might have a 2% earning from your investment when you invest on a short-term basis. A 30% gain over a five-year period is guaranteed when you file your Social Security at your full retirement age compared to rushing to file at 62.

One of the main problems in claiming Social Security at 62 will reduce your benefits and to a certain extent for life. However, even if you already filed your Social Security at 62 and you started collecting your benefit, you still have the chance to undo your application and won’t face a permanent benefit reduction. You must undo your application within a year of filing and whatever the amount you collected from Social Security Administration must be all paid. By doing this, you can continue to delay benefits as if you had never filed it in the first place. But, if you fail to undo your application and continue collecting, your monthly benefit is locked in and you will continue to collect the amount as long as you live and this just means that you may possibly end up decreasing one of your largest retirement income streams.

Claiming at 63 or 64 years old

Even though 63 is not a popular age to file for Social Security, it is still an option. Filing at the age of 63 will still reduce your benefits compared to filing at the full retirement age but the reduction is not the same and not as big as when you file at 62. Making use of our example, if you receive a monthly benefit of $1,500.00 when you file at 67, it will be reduced to $1,125 when you file at 63.

The case is the same when filing for benefits at 62 or 63, filing at 64 means reducing the monthly amount you are receiving from SSA. In here, you are looking at a reduction of about 20% if 67 is your full retirement age. To use our example, instead of a monthly benefit of $1, 500.00, it will become $1,200.00. It clearly shows that you will get more money when you file at 64 than at 62 but not as much as when you are 67.

Claiming at 65 years old

Most of the senior citizens presume that filing for Social Security at the age of 65 is ideal since it is the age where Medicare eligibility kicks in. Although the two programs are connected, it is not a requirement to simultaneously sign up for both. As a matter of fact, filing at the age of 65 will automatically reduce your retirement benefits.

Still using our example, you will get a monthly benefit of $1,300.00 if you file for social security at 65 compared to a $1,500.00 monthly benefit if you file at full retirement age. Come to think of it, it is not a terrible cut compared to what you will get when you file at 62 ($1,500,00). However, a $200.00 difference in monthly benefit can go a long way.

Claiming at 66 years old

Age 66 is your full retirement age for Social Security purposes if your birth year is between 1943 and 1954. At this age, you are entitled to claim the exact monthly payout according to your earnings record.

If you are born between 1955 and 1959, you are eligible for a full monthly benefit as soon as you reach age 66 and a particular number of months. You have to remember that you have to have the right timing in computing for your exact age since the tricky part for this age range is that if your full retirement age is 66 and four months and you decide to file at 66 and a month years old, you will have your benefits reduced but not by a lot.

If you were born later than 1959 then your full retirement age is 67 and filing at 66 will automatically reduce your benefits. But then again, the reduction is not as much. Using our example, when you file at age 66 and your full retirement age is 67, you will collect the amount of $1,400.00 instead of a $1,500.00 monthly benefit.

Claiming at 67 years old

Age 67 is when you reach full retirement age if you were born in 1960 or later. This means that if you file for Social Security, you will have the full monthly benefits that you are entitled to base on your earnings record. Experts say that filing at full retirement age is ideal since in this time you are not waiting too long to get your hands to your benefits at the same time your benefits are not reduced. Using our example, you will get an exact amount of $1,500.00 if you claim your Social Security at age 67 based on the record of your earnings. Remember that those who were born before 1960 will automatically boost their benefits if they file at the age of 67.

Claiming at 68 or 69 years old

When it comes to filing for benefits, it is hardly a common choice to choose 68 as ideal. But still, if you are not in an immediate need of your benefits and you do not want to wait long for the benefits until 70, then considering filing at this age is still a smart move.

Depends on what your full retirement age is, filing at age 68 will result in an increase of benefits from 8% to 16%. If 66 is your full retirement age, you will enjoy the full increase of 16%, and if 67 is your retirement age then you will enjoy the increase of 8%. Making use of our example, your $1,500.00 monthly benefit will become $1,620.00 when you file at age 68.

Just like age 68, 69 is not a popular filing age. Nevertheless, if you can just wait until then, you will increase your benefits from 16% to 24% if you’re retirement age is 67 and 66 respectively. Using our example, you will expect to receive $1,740.00 instead of a $1,500.00 monthly benefit.

Claiming at 70 years old

The longest age that you should wait for you to file for Social Security is age 70. This age is when delayed-retirement credits stop to accumulate. So even if you wait for more years you will have no financial incentive to hold off the filing.

Naturally, the good thing about filing your Social Security at 70 is your your maximum benefit will increase. If age 66 is your full retirement age, your benefits will increase by 32%. Your benefits will increase by 24% if your retirement age is 67 and this only means that if we will use our example you will get a monthly benefit of $1,860.00 instead of $1,500.00

Not everybody can wait for their benefits until their 70 years old. Some need the money earlier and holding out until 70 might give them a hard time financially. Even if money is not an issue to you, waiting for your benefit until 70 may push your retirement plans to be delayed, so it might be a disadvantage.

Claiming past age of 70

Filing for your Social Security when you turn age 70 is not a requirement but a preference as stated above. But it might be a big mistake to wait for filing at this point. It is because your benefits will not in any way increase by a penny if you decide to delay filing past the age of 70. Even if you don’t have financial issues like paying bills or spending it on leisure, investing your money or putting it in the bank is much more strategic than delaying your benefits.

If you happen to overlook filing for benefits at the age of 70, there is still nothing to lose as long as you realize the error as soon as possible. You will receive up to six months of retroactive benefits from Social Security. Accordingly, you will get the four months’ worth of benefits if you were able to file at age 70 and 4 months. But if you were able to file only at your 71st birthday, it will result in forgoing six months’ worth of benefits.

Note: 

Determining the best time to file for Social Security is really a daunting task. You must study factors that needs to be considered for you to be able to choose your perfect time in filing for Social Security since every person has a different “perfect time”.

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