The decision to sign up for Social Security isn't one to take lightly, because the filing age you land on will dictate how much monthly income you ultimately collect during your senior years. You're entitled to your full monthly benefit, based on your personal income history, once you reach full retirement age, or FRA, which is either 66, 67, or somewhere in between, depending on your year of birth. However, you're allowed to claim benefits as early as age 62, or delay your filing until age 70. The latter move will boost your benefits by 8% a year, so it's an appealing one to consider -- especially if these circumstances apply to you.
Many seniors are forced to retire earlier than planned, and the unfortunate reality is that if you lose your job later in life, you might struggle to find another one. But if your employer is willing to keep you on and you're able to continue working until age 70, then doing so should make it possible to delay your benefits until that point, thereby allowing them to grow.
As a general rule, it pays to claim Social Security on the early side if your health isn't great and you don't anticipate living a long life. While you'll lower your benefits on a monthly basis, you'll score a higher lifetime benefit if you sign up for Social Security in your early 60s and pass away 10 years later. But on the flip side, if your health is in top shape and you're likely to live a long life, then filing for benefits at 70 won't just give you more money on a monthly basis; it'll likely result in a higher lifetime benefit as well.
Social Security shouldn't be your only income source in retirement. But if you're nearing your senior years and you've missed the boat on contributing steadily to a dedicated retirement plan, then boosting your benefits by claiming them at age 70 is a good way to compensate. Social Security will only replace about 40% of your pre-retirement income if you're an average earner. If you wait until age 70 to sign up and increase your benefits in the process, you'll replace more of your former income, thereby decreasing your chances of struggling with a financial shortfall.
The more money you collect from Social Security, the more comfortable a retirement you're apt to experience. Remember, the increase you snag by delaying your filing will remain in effect for life, so it pays to consider claiming Social Security at 70 if that option exists.
In fact, to illustrate the impact that might have, let's imagine you're entitled to a monthly benefit of $1,500 at an FRA of 67. Each year you delay your filing will result in a higher benefit until you max out at $1,860. That's a sizable boost to lock in.
That said, if you can't manage to delay your Social Security filing all the way until age 70, try holding off for one or two years instead. Any amount of waiting will have an impact, and one that could make your retirement a lot more enjoyable.