Should You File Early for Social Security?

Should You File Early for Social Security?

You’ve worked for years, and you’ve paid thousands into Social Security. Now that you’re getting closer to retirement age, it’s time to make the decision on when to begin drawing these benefits. While it’s tempting to take them as soon as possible, even claiming your benefits when you reach retirement age may not be the best decision. Filing early can cost you hundreds of dollars a month; by waiting as long as possible before you begin drawing, you can gain significantly more in monthly benefits.

Why Wait?

The reason you may want to wait a few more years on your monthly Social Security payouts is entirely monetary. When you file early, you only receive a percentage of the money you could be receiving. When you file at your full retirement age, you receive 100 percent of your payout. You can increase this even more, though. By waiting later to take your Social Security, you could receive hundreds more per month than you would by taking the benefits at your full retirement age.

Should I Wait?

Knowing the advantages of waiting to draw Social Security, it may seem like the decision to wait is obvious. However, there are some situations where drawing early is a better idea:

  • You need the money now: If you’re struggling with your household budget because your other retirement savings don’t give you the monthly income you need, you may want to consider filing for your benefits early. If you plan to invest your income in other, higher interest investments, you may want to begin drawing early as well.
  • You are ill: If you have an illness that could lead to an early death, earlier filing ensures you get to draw as much of your Social Security as possible. On the other hand, if you have no major health issues and your family history shows you may live to see 105, you may want to delay in order to maximize the payout you will receive each month.
  • You can’t find a job: It’s no secret that finding work can become harder as you age. In fact, a study from the Pew Charitable Trusts found that more than 43 percent of unemployed workers older than 55 had been out of work for at least a year. If you find a job within a year of beginning your Social Security, you can stop the payments and file for the benefits again later. If you are under retirement age, you can also work part-time while drawing your benefits. In 2014, you can earn up to $15,480 annually before your payment is affected, according to the Social Security Administration.
  • Your spouse is delaying: If you or your spouse passes away, the other will have the option of drawing either your Social Security or his own. If one of you delays filing while the other files early, you still have the option of drawing whichever is greater after one of you passes away.

You may also want to check out online tools like the benefits calculator from AARP, which can help you choose the option that is best for your unique situation. Deciding when to draw your Social Security can greatly impact your retirement planning, so meeting with a retirement planner or a financial adviser is a good idea.

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