The Big Question You Need to Ask Yourself Before Filing for Social Security

Some seniors can't wait to get their hands on their Social Security income, so much so that they file for benefits at the earliest possible age of 62. Then there are those who hold off on taking benefits as long as possible to boost them for the rest of their lives.

The decision to file for Social Security benefits isn't one to be taken lightly, since the age at which you initially claim benefits will impact your ultimate payout. If you file for benefits at your full retirement age, you'll get the precise amount you're entitled to based on your earnings record. Full retirement age is based on your year of birth, as follows:

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Year of Birth

Full Retirement Age




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months



Of course, you can file for benefits as early as age 62, but in doing so, you'll reduce them by about 6.67% a year for the first three years you file early, and 5% for each year thereafter. This means that if you're looking at a full retirement age of 67 but claim benefits at 62, you'll lower them by 30%. Furthermore, your benefits won't go back up once you reach full retirement age. Rather, that reduction will remain in effect for the rest of your life unless you undo your application for Social Security within a year and repay every cent of it you received.

Then there's the other side of the coin -- delaying benefits past full retirement age and boosting them by 8% a year, which you're allowed to do up until you turn 70. Once you reach 70, there's no longer an incentive to wait, which is why that's generally considered the latest age to file for Social Security benefits, even though no one will force you to do so at that time.

Now there are different factors that will undoubtedly go into your decision of when to file. If your nest egg is underfunded, you may decide to hold off on Social Security as long as possible and boost your benefits to compensate. And if you have a few million dollars in your 401(k), you might choose to take benefits early and enjoy that money while you're young enough to make the most of it.

But there's one basic question you need to ask yourself before claiming benefits, regardless of what your financial picture looks like: "How's my health?"

Getting the most out of Social Security

Why should your health be a major factor in deciding when to take benefits? The reason boils down to the fact that Social Security is designed to pay you the same total lifetime amount regardless of when you initially file. The logic is that any reduction in payments you face by filing early is offset by the larger number of payments you collect, and vice versa -- when you file after full retirement age, you collect fewer payments, but each payment is more robust.

This formula, however, hinges on one key factor -- that you live an average life expectancy. So if your health isn't great, it generally pays to file for benefits as early as possible. The opposite is true if your health is outstanding -- there's a good chance you'll get more out of Social Security by waiting.

Imagine your full retirement age is 67, at which point you'd be entitled to $1,600 per month in benefits. Filing at 62 will reduce each payment you collect to $1,120, but you'll collect 60 more payments. If you live until just over 78 1/2, you'll come away with roughly $223,000 in either scenario. But if you die at 72, which is relatively young, you'll come out about $38,000 ahead by filing at 62 instead of waiting until full retirement age.

Now let's run the opposite scenario. Imagine your health is fantastic, so you delay your benefits until age 70, thereby increasing each monthly payment to $1,984. If you live until 82 1/2, you'll break even at $297,600 whether you file at 67 or 70. But if you make it to 90 (which, according to the Social Security Administration, one in 10 seniors who reaches 65 will do), you'll end up with about $34,500 more by waiting as long as possible.

Of course, in the absence of a crystal ball, it's impossible to predict how long you'll live. But know this: The better your health, the more it makes sense to wait on benefits, so if you're thinking of filing, ask yourself how you're holding up physically, and whether you're willing to sit tight to boost what could come to be your most critical retirement income stream.

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