For those who have paid into the system, Social Security promises to provide a reliable source of income during your senior years. However, how much you receive each month depends on exactly when you retire. While a person needs to wait until his or her full retirement age – that would be 66 for those born between 1943 and 1954 – to receive full benefits, the government allows those as young as 62 to file for Social Security. In exchange for early benefits, a senior agrees to receive a reduced monthly amount for the rest of his or her life.
As noted in our December 2014 article in this e-newsletter entitled “Timing Social Security Retirement Can Increase Benefits for Life,” the longer one waits to claim, the higher the monthly benefit. In the extreme, claiming at 70 instead of at the earliest age of 62 can raise lifetime monthly benefits by 76 percent. Yet 62 remains the most popular age to start taking benefits. According to a recent article in The Journal of Retirement, approximately 50 percent of women and 45 percent of men start claiming at the earliest possible age of 62. But waiting to claim pays off big time.
Social Security benefits can be reduced by as much as 7 to 8 percent for each year a person files early. Most people will likely come out ahead by waiting until their full retirement age or beyond to file for Social Security. Statistics show that the Social Security “breakeven point” – the age at which one would have received the same amount of total benefits had he filed at age 62 or age 70 – is generally around age 78-80. After that, later filers will receive higher monthly payments for life.
However, there are three situations in which filing early can make sense.

• You can coordinate your benefits with a spouse. Rather than make filing decisions independently, couples should consider their Social Security benefits jointly. If both spouses are eligible for benefits, it might make sense for one spouse to file early while the other spouse waits until his or her full retirement age or even later to file for benefits. Then, when one spouse dies, the surviving spouse will, in most cases, continue to receive the larger of the two amounts.
• You are seriously or terminally ill. The next reason to file early for Social Security is if you believe you might not live long in retirement. But seniors should not to make hasty decisions based solely on their family history. Even if someone’s parents died early, it doesn’t necessarily mean that person is destined for the same fate.
• You have no money and limited earning options. For seniors with limited financial resources, filing early for Social Security may be less of an option and more of a necessity. Older Americans who have been laid off, injured or are without a steady source of income may find a reduced Social Security benefit is better than no money at all.

Talking to a financial professional is key to making the right decision. Depending on the retirement accounts you have, it may make more sense to dip into another fund for living expenses and let Social Security benefits grow.
For more information about Social Security claiming strategies, contact us online or call us at 601-987-3000.