Is the Right Time to File for Social Security as Soon as You Stop Working?

When you're working and collecting a paycheck, the need for Social Security income may not be all that pressing. But many seniors rush to take benefits as soon as they leave their jobs, the logic being that without a paycheck, they need a means of paying the bills. The question is: Should you plan on filing for Social Security as soon as you stop working? Or might there be a better time to claim benefits?

Benefits don't always start right away

Some seniors think they can file for Social Security and start collecting benefits that same week. Not so. It can take a good six weeks to process a Social Security application -- sometimes longer. Therefore, if you want your benefits to start as soon as you stop working, you're better off applying for them three months in advance. This means that the earliest age you can apply for Social Security retirement benefits is 61 and nine months, assuming you want to start collecting benefits at the earliest possible age of 62.

Of course, applying for Social Security benefits is hardly a complicated process. The easiest way to apply is through the Social Security Administration website. You can also apply over the phone or in person at your local Social Security office. That said, the Social Security Administration might request certain information to verify your claim, such as tax or marriage records. You'll need to plan for that lag if you want to start receiving benefits the moment you stop working.

Waiting on benefits can really pay off

Many seniors have no choice but to start collecting benefits immediately after leaving their jobs. But before you rush to do so, know that you might have other options for generating income temporarily that allow you to hold off on filing. And it pays to hold off on filing provided you're not yet 70, because the longer you wait, the more you stand to collect each month.

For one thing, filing for benefits before reaching full retirement age means reducing them in the process, so while you're allowed to take benefits as early as 62, doing so will slash your monthly payments by 30% if your full retirement age is 67. Furthermore, if you delay benefits past your full retirement age of 67, you'll boost them by 8% a year up until 70, at which point there's no sense in waiting any longer. Therefore, if you stop working at age 66 when your full retirement age is 67, waiting a year to file for Social Security will help you secure a larger monthly benefit payment for life. The same holds true if you stop working at 67 but wait until 68 to file.

Keep in mind that if you stop working not by choice but as a result of having gotten laid off, there might be other income you can access that allows you to wait on Social Security for a bit. First, you can file for unemployment benefits, which will replace a portion of your former paycheck. Those benefits might tide you over if you also have some money from savings to fall back on. Next, you can see if you're entitled to severance pay, which could, depending on what your company offers, replace your former paychecks for weeks or months following your separation from your employer.

Even if you leave your job voluntarily, it doesn't mean you need to rush to file for Social Security the moment your farewell party wraps up. If you have savings, investments, or another income source, like a home you can rent out, you can leave your benefits alone for longer, thereby securing a more robust Social Security income stream for life.

While it's natural to assume that you should file for benefits right away once you stop working, doing that doesn't always make sense. But if you know you'll need those benefits immediately, you should actually file before you stop working so that your application is processed and ready to go. This way, you won't have to worry about a disruption in income that kicks your retirement off on the wrong foot.

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