The idea of social security income may seem simple: you reach the age where you are eligible to start collecting social security benefits and you collect that money. But as you look at all your options, it may be more complicated than you expected. There are many ways you can claim benefits, and your choices will determine how much you receive. All this may seem daunting, but we have put together a simplified guide to better understand social security claiming strategies.
What is Full Retirement Age and how does it impact your social security?
You are first eligible to begin collecting benefits (actually reduced benefits) at age 62. Yet depending on your situation, it may make sense to delay the start of benefit payments. The longer you wait, the higher your monthly benefit will be. To receive your full monthly benefit, you must wait to begin collecting benefits until you reach what the Social Security Administration deems as “Full Retirement Age” (FRA) or “normal retirement age”. For anyone born after 1960, this will be 67. While you can claim benefits between ages 62 to 70, there is no one-size-fits-all-policy as everyone’s situation is different.
What are the considerations for when to take social security benefits?
While deciding when to claim benefits, you should consider more than just the monthly amount you can receive from social security. Here are a few main considerations:
Longevity
While often hard to think about, you should consider your potential life expectancy. If you currently have or could expect to have serious health issues, it may make sense to claim earlier than Full Retirement Age. Conversely, if you are healthy and have reason to see the potential to live longer than the average life expectancy, it may make sense to defer beyond FRA to receive the highest monthly benefit possible. Monthly benefits continue to increase beyond FRA and reach the maximum at age 70.
Investment Opportunities
Some individuals may claim benefits early to invest in the market. They believe they can earn more this way than waiting to claim and receive social security benefits at an older age. This may be a risk strategy for many because market returns are not guaranteed, and you run the risk of losing what you have invested.
Health Care Coverage
Your health insurance could also be a determining factor when considering your benefits. Depending on your age, it may render you unable to contribute to certain types of retirement account vehicles. For example, if you are contributing to a Health Savings Account (HSA) and you are over the age of 65, this would no longer be possible.
Though these points only scratched the surface of when to claim your social security benefits, here at Marshall Financial Group we look at your full financial picture when advising you on your personal benefit claiming strategy. In addition to knowing and understanding your financial situation and your goals, we incorporate technology to evaluate different scenarios and timelines for taking benefits. We work to advise you on the best social security claiming strategy going forward.
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