Counting down to retirement can be both exciting—and stressful. These doable Social Security tips can help you figure out the best age for you to file for retirement benefits.
Planning for retirement can be a little bit like putting together a puzzle: To boost the odds of meeting your retirement goals, you’ll have to fit all the pieces together, just so.
An essential piece of the retirement puzzle is figuring out the best age to claim Social Security. A few factors influence your Social Security filing choice—and your timing may not be the same as a friend or even a spouse. These Social Security tips can help you decide what’s best for you.
Tip No. 1: Review how Social Security works.
Established in 1935, Social Security was never intended as a full income replacement program. It works like this: Throughout your working lifetime, you contribute to the Social Security system through payroll tax deductions. Those funds are in turn paid out to people who are currently eligible for Social Security—mostly retirees but also disabled workers or families where a spouse or parent has died, to name a few. How much you might receive when you claim Social Security retirement depends on your lifetime earnings and the age at which you claim benefits.
Tip: Estimate your benefits at any time by creating a My Social Security account at ssa.gov.
Tip No. 2: Understand the full retirement age cut-off.
People are eligible to claim Social Security from age 62 to 70 (there’s no financial benefit to waiting past age 70). The only way to receive full Social Security benefits is to claim them at full retirement age, sometimes referred to as FRA. If you claim Social Security before then, your benefits will be reduced.
|If you were born …||Your full retirement age (FRA) is …|
|1955||66 and two months|
|1956||66 and four months|
|1957||66 and six months|
|1958||66 and eight months|
|1959||66 and 10 months|
|1960 or later||67|
Tip No. 3: Consider your health.
By design, Social Security is intended to replace just a portion of your pre-retirement income, and work with other retirement savings to last throughout the entirety of your post-work life. How long that retirement will be is the question. Family history, personal health, and average life expectancy all come into play. If you’re able to delay Social Security and other retirement account withdrawals at least until full retirement age or longer, you’ll have bigger benefits to rely on. One tool that some people find useful? A breakeven calculator, which helps you compare how taking or delaying benefits plays out. (Search the internet for “breakeven Social Security calculator.”)
Tip No. 4: Factor in your work plans.
You don’t have to stop working once you reach full retirement age; if you’re receiving full Social Security benefits, you can earn as much as you want without any impact.
That’s not the case if you continue working and take Social Security before you reach full retirement age. Then the earnings test comes into play: Some or all Social Security benefits can be withheld depending both on how much you earn and how old you are. (Once you reach full retirement age, those benefits are increased permanently.) If your earnings test withholding exceeds your full Social Security benefit, the entire benefit will be withheld until you turn the full retirement age. Find an earnings test calculator at ssa.gov.
Tip No. 5: Calculate the impact of taking Social Security early.
You can choose to claim Social Security as early as age 62, but there’s a marked financial impact to doing so. And while the full retirement age is 67 for many, if you delay until age 70 you’ll also reap a benefits reward, referred to as delayed retirement credits. Generally, for every year you wait, benefits go up 8% each year until you reach age 70. Take those benefits before your full retirement age, and your benefit decreases—permanently.
|Retirement age||% benefits reduction or increase||Sample monthly benefit|
Tip No. 6: Factor in spousal benefits.
Spouses have two options for Social Security: They can claim benefits based on their earnings or collect spousal benefits based on 50% of their spouse’s Social Security benefit, whichever is higher. In addition, a spouse doesn’t have to have worked to claim this benefit; they just must be at least 62 years old OR age 62 and receiving or eligible for benefits or receiving disability benefits. The spousal benefit calculator on ssa.gov can help.
Tip No. 7: Determine if you’re eligible for divorce or widow benefits.
If you meet certain conditions, you may also be able to claim divorce benefits:
- Age 62
- Marriage of 10+ years
- Divorced at least two years
- Not remarried
- Benefits you’d be entitled to receive on your own are less than the benefits you’d receive based on your former spouse’s work.
Your spousal benefits don’t decrease if your former spouse has multiple divorces, and you’re eligible whether or not they’ve claimed their own benefits. There is, however, a maximum amount you can receive based on your former spouse’s record—50% of what they would get at their full retirement age—and that decreases if you file before you reach your own full retirement age. Finally, if a former spouse claims benefits on your Social Security record, your own benefits are not decreased.
Widow benefits are structured a little differently. The surviving spouse is eligible for the full benefit when they reach full retirement age, or a reduced benefit at age 60. If the surviving spouse is disabled, they may receive benefits as early as age 50. The benefit amount depends on both age and the amount the deceased spouse was entitled to at the time of death.
A widowed, divorced spouse may collect benefits if the marriage lasted 10+ years, but not if they remarried before age 60. And a widowed, divorced spouse cannot receive both spousal and widow benefits—it’s one or the other.
Tip No. 8: Calculate the taxes for claiming Social Security.
Social Security benefits are taxable at the federal level and by some states. How much depends on both your filing status and current income. Check with your tax advisor for more insight.
In addition, if you’re retiring abroad, you won’t be subject to dual taxation if you live in one of 30 designated countries. There may be domestic tax, benefits transfer, or currency exchange implications. Use the Payments Abroad screening tool at ssa.gov.
Tip No. 9: Consider the overall state of Social Security.
You’ve probably read news stories about the Social Security Trust Fund being exhausted around 2035 (the forecasts differ). It’s true that the combination of more retiring baby boomers coupled with a declining birth rate means that fewer workers are contributing to a system with more retirees. Does that mean Social Security would go away? No one knows. Benefits may decrease, for example, or contributions could increase. In addition, even if the Social Security Trust Fund is depleted, there would still be employees working and contributing some portion of the Social Security needs of current retirees.
Retirement income planning is a delicate balancing act. How will you fund your retirement budget with what you know are guaranteed sources of income—a defined benefit plan, annuities, or work income—along with other sources such as an IRA, 401(k) or 403(b), or Roth IRA? And how does the guaranteed level of Social Security benefits you’ll be entitled to at that future date fit in? Our free Retirement Wellness Planner can help you estimate (log in for a personalized report).
- Once you’ve determined the best age for you to claim Social Security, plan for time to reevaluate your retirement savings rate. Would catch-up contributions help you meet your goals? Log in to your Principal account to see how much you’re saving. Don’t have an employer-sponsored retirement account? We can help you set up your own retirement savings.