Each and every one of these is super important.
There’s a good chance Social Security will play an important role in your retirement. After all, once you start getting benefits, you’re entitled to them for the rest of your life.
That’s why it’s important to sign up for benefits at the right time. Your Social Security filing age will play a role in determining how much monthly income you get from the program. So before you file, run through these key questions to make the right decision.
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1. What benefit am I eligible for at full retirement age?
Full retirement age is when you’re entitled to your complete Social Security benefit without a reduction. You can file for Social Security as early as age 62, or you can delay your filing for a boosted benefit up until age 70.
But before you make that choice, it’s important to know what benefit you’re eligible for based on your personal income history. So to that end, create an account on the Social Security Administrations’ website.
From there, access your most recent earnings statement. It will show you what benefit you’re entitled to at full retirement age, and also, what filing early or late will do to that benefit. Having those numbers mapped out clearly could make your decision easier.
2. What savings balance do I have?
You may have a basic budget you plan to stick to in retirement. The more savings you have, the less reliant you’re apt to be on Social Security. And on the flipside, the less money you have saved, the more important it might be to avoid a reduction to your Social Security benefits.
Do an assessment of your savings so you’re aware of not just your total balance, but the amount of income your nest egg will provide you with on a monthly basis. To pull this off, you’ll need to land on a withdrawal rate you feel comfortable with.
You may decide to use the 4% rule to manage your savings. For a $500,000 balance, that would have you withdrawing about $20,000 per year, or about $1,667 per month. From there, you can see how much more money from Social Security it’ll take to cover your expenses.
3. What do I want my retirement to look like?
You may have plans to spend money in retirement beyond covering your essential bills. The specific goals you have should help dictate when you sign up for Social Security.
Say you’ve always dreamed of starting your own bakery, so you plan to apply for a license to sell baked goods out of your home. If you won’t be renting a commercial space, that’s a fairly low-cost hobby that could end up making you money. And you may not need so much income from Social Security to make it happen.
On the other hand, let’s say a big part of your dream retirement involves traveling overseas twice a year. That might cost you thousands of dollars on top of your basic expenses. In that case, waiting to claim Social Security — and boosting your monthly benefit in the process — could make a lot of sense.
The decision to claim Social Security is a big one, and it’s important to approach it with confidence. Tackle these three questions before signing up and get all of the right information so you’re empowered to claim benefits at an optimal time for you.
