Do not file for social security until you've answered these 3 questions – Motley's Fool

It is likely that Social Security will play an important role in your retirement finances. That's why you really need to show some strategy to claim benefits. Here are three key questions you should be able to answer before you start thinking about the rankings.

1. Did I reach the retirement age?

Your social security benefits are calculated based on what you earned during your stay in the job market (especially your 35 highest paid years of work). But the age at which you apply for benefits could affect the amount you actually get back.

If you apply for benefits at the retirement age, or FRA, you will get the exact monthly benefit to which your earnings record entitles you. Your FRA depends on your year of birth, as follows:

Data source: Social Security Administration.

That said, you have the right to file a social security claim as early as age 62. However, applying for benefits before the FRA will result in a reduction in your monthly Social Security income, and most likely permanently. The magnitude of this reduction will depend on your FRA and the speed with which you drop, but in the most extreme scenario (producing at 62 with an FRA of 67), this can represent up to 30% of less. Therefore, it is often advantageous to wait for FRA to make a profit unless you have a compelling reason to file earlier.

2. Are my economies in good health?

Social security should ideally be only a part of your total retirement income. But if you do not have a lot of savings, this could be the most important thing. If this is the case, it may be illogical to claim benefits at retirement age. You should think about postponing benefits beyond FRA. Each year, you accumulate credits that increase your benefits by 8% per year, up to the age of 70, when this incentive is exhausted. Therefore, be sure to assess your savings before applying for social security. If your nest egg is not so important, delaying and increasing your benefits could be your best way to save your retirement.

3. Will I continue to work?

An interesting feature of Social Security is that you are allowed to work and collect benefits simultaneously. You may need these benefits to increase your income later in life, especially if you have to reduce your work time for health reasons. Or, you could simply want to these benefits to enjoy life while you are a little younger.

That said, if you file a claim before FRA, you may see a portion of it withheld if your earnings exceed a certain threshold. This limit changes from year to year, but in 2019, you will have retained $ 1 of unpaid benefits for every $ 2 earned above $ 17,640. The only exception is if you reach FRA later this year, in which case you can earn up to $ 46,920 without affecting your benefits. From there, you will have deducted 1 social security dollar for every $ 3 you earn.

Note that these benefits are retained and not lost. The Social Security Administration will add them to your monthly payments when you reach FRA. But the reduction in benefits you will face by filing early will If you plan to continue working and hope to earn a decent living, it may be worthwhile to delay paying benefits until you reach FRA. At this point, you can earn as much as you want while still seeing all of your benefits.

The decision to file for social security should not be taken lightly. Make sure you answer all three questions before signing up.