3 Reasons to File for Social Security on Time

Some people would be better off claiming their Social Security benefits as early as possible, while others would do better to delay. When should you claim your benefits? You might want to use the Goldilocks story as your guide: Instead of getting porridge that's too cold or too hot, get the one that's just right. And instead of filing for Social Security at 62 or at 70, claim that valuable retirement income on time.

Here's a closer look at just what "on time" means, in the world of Social Security, and why you might want to file for your benefits then.

What's "on time"?

Anyone who plans to retire one day and who is entitled to some Social Security benefits needs to understand the "full retirement age" concept. That's the age at which you can start collecting the full benefits to which you're entitled.

It's important to know that age because it's likely to be a key part of your Social Security strategizing. The full retirement age used to be 65 for everyone, but it's now 66 or 67 (or somewhere in between) for most people. Check out the table below to see what your full retirement age is:

The effect of claiming early or late

No matter what your full retirement age is, you can start collecting your Social Security benefits as early as 62 and as late as 70. Starting early will give you smaller checks, while delaying will beef up your checks. The table below shows what percentage of your full benefits you'll receive if you start collecting at various ages:

As an example, then, if your full retirement age is 67 and you start collecting at 63, you'll receive 80% of what you would have received if you had started on time, at 67. What would have been, say, a $2,000 check will become a $1,600 one. Meanwhile, if you delay from 67 to 69, your checks will be about 116% of their full-retirement-age size. That would turn a $2,000 check into a $2,320 one.

Here's the kicker, though: If you live an average-age life, you'll come out about even, no matter when you start collecting. After all, starting early will give you smaller checks -- but many more of them. And vice versa.

Now let's look at why starting to collect on time instead of early or late might make sense for you:

Reason 1: You need the money

Many retirees don't get the luxury of deciding to delay starting to collect Social Security benefits. They simply need income as soon as possible, perhaps because they ended up retiring earlier than planned due to an illness or job loss.

According to research by ProPublica.com, "More than half of older U.S. workers are pushed out of longtime jobs before they choose to retire, suffering financial damage that is often irreversible." The 2018 Transamerica Retirement Survey of Retirees agrees with that number, finding that 56% of retirees retired sooner than they'd planned to, with 24% of them citing a job loss and 47% citing health- or family-related causes.

If you retire earlier than expected, there's a good chance that you haven't managed to accumulate the amount of money you need for retirement -- in which case any available Social Security income may be critically necessary. If that's the case for you, though you may have been planning to delay starting Social Security until age 70, you may want or need to start the checks coming around your full retirement age (if not a bit sooner).

Reason 2: You don't need the money right now

Another reason to start collecting at your full retirement age is because you're among those who don't need to start collecting early. If you have enough to live on from age 62 to your full retirement age, wait until then to start collecting -- and consider delaying even longer if you comfortably can.

That might seem pointless, since those of average-length lives will collect about the same total benefits no matter when they start, but there are some other considerations, such as spousal strategies.

For example, you and your spouse might start to collect the benefits of the one with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, both of you get some income earlier, and when the higher earner hits 70, you can start those extra-large checks flowing, giving you both a lot more income.

Also, when one of you dies, the other gets to collect only one of those two benefit checks, and will of course want the bigger one. Thus, if you both managed to make the higher earner's check as big as possible, the surviving spouse can end up with those big checks. (Widows and widowers are often able to receive 100% of their late spouse's benefit instead of their own, which is another reason to not start collecting too early.)

Reason 3: Your inflation adjustments will be bigger

A third reason to bypass those smaller checks you get from starting to collect Social Security checks early is inflation. Benefit checks get inflation adjustments over time -- though not always every year. The increases are often modest -- and don't necessarily cover actual increases in many seniors' costs of living.

The increase for 2019 was 2.8%. The bigger your benefits are when you start collecting them, the more dollars you'll get from each inflation adjustment. So if you were collecting a $2,000 check every month in 2018, your 2019 checks would be $2,056. If you'd managed to wait a few years before filing for your benefits and you ended up with checks of $2,480 in 2018, then the 2.8% increase would have bumped your total up by $69 to $2,549.

The more you learn about Social Security, the better decisions you can make regarding it -- and the more money you can get out of the system you've been paying into for so long.

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