Deciding when to claim Social Security could be an important key for older adults unlocking their retirement future. Claiming early could be the best move for retirees in poor health, who need immediate income or for other reasons taking benefits could be a wise financial move.
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Here are three key signs you should file for Social Security sooner rather than later.
You Have a Lower Life Expectancy
Many financial experts don’t recommend filing for Social Security early, because the reduction in payments can be drastic.
Doug Carey, a chartered financial analyst (CFA) and founder and owner of WealthTrace, a consumer retirement and financial planning software company, said claiming at 62 instead of the full retirement age of 67 could be costly.
“Their payments are reduced by 30% per month,” Carey said. “Over time, this can add up to thousands of dollars in reduced payments.”
However, Carey said if an older adult has a lower life expectancy, then filing for Social Security sooner rather than later makes financial sense.
“Generally speaking, if you expect to live to at least age 75, it wouldn’t make sense to take Social Security early,” Carey said. “But if you have serious health conditions or a family history of shorter lifespans, claiming early could be the right strategy.”
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Your Spouse Will Earn More
Claiming Social Security early may be a wise move, depending on one’s marital status. Joseph Patrick Roop, president and founder of Belmont Capital Advisors, said filing for Social Security sooner could be an option for a single person in poor health who is no longer working or a married couple.
“Spouses should strategize to determine which one should file last to maximize benefits by waiting until age 70,” Roop said. “Typically, the higher-earning spouse should delay filing until 70 to maximize their benefit.”
Roop explained, “After one spouse passes away, the surviving spouse will continue receiving the larger of the two benefit checks while the smaller check is lost.”
Melissa Pavone, founder at Mindful Financial Partners, said divorced retirees who were married for at least 10 years and are unmarried now may be eligible for spousal benefits based on their ex-spouse’s earnings. “In some cases, claiming early may make sense, especially if your own benefit is lower.”
For older adults whose spouse is deceased, Pavone said surviving spouses can claim reduced survivor benefits as early as age 60.
“But switching strategies — claiming their own benefits later — can optimize overall payouts,” Pavone said.
You’re Worried
The Social Security Trust Fund will face a shortfall within the next decade unless Congress acts sooner rather than later to shore up funds for the federal entitlement program.
Economists at the Peterson Foundation, a fiscal think tank, estimate that “without reform, the combined Social Security trust funds will be depleted in 2035, at which point program benefits would be reduced by 17%.”
Krisstin Petersmarck, a National Social Security Advisor (NSSA) and investment advisor representative at New Horizon Retirement Solutions, said many people are worried about the future of the Social Security Trust Fund.
“It is not uncommon for individuals who are worried that the benefit could be reduced or eliminated to make the decision to claim early and receive income before it may not be available,” Petersmarck said.
She said older adults should understand that they cannot go back once they have claimed their benefits and received payments for 12 months.
“The best decision is to consult with a financial advisor who specializes in retirement planning to weigh the different claiming options and how it can impact you long term,” Petersmarck said.
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This article originally appeared on GOBankingRates.com: 3 Key Signs You Should File for Social Security Sooner Rather Than Later
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