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Signing up for Social Security at the right time could help you get the most out of the program in your lifetime. And to that end, you’ll often hear that deferring benefits until age 70 is a good idea.
Although you are allowed to register for Social Security from the age of 62, you will not receive the full monthly benefit to which you are entitled based on your personal income history once you reach age. full pension, or FRA. FRA depends on your year of birth, but it’s either 66, 67, or somewhere in between.
If you apply for social security before FRA, your monthly benefit will be permanently reduced. On the other hand, if you delay your declaration until age 70, you will increase your benefits by 8% per year during the process. But while a higher monthly benefit may sound like a good thing to have in theory, in practice you might be much better off claiming Social Security well before the age of 70.
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Why it pays to apply for social security early
Social Security is technically designed to pay you the same amount for life, regardless of when you first registered for benefits. It might seem like an odd concept at first, but when we dig deeper it makes sense.
If you apply for Social Security early, you will get a smaller monthly benefit, which means less money. But you will also receive more monthly payments over your lifetime, which means more money. The same is true if you apply for benefits at age 70 – you will receive more money each month, but fewer months of payments.
All in all, things should even out if you are living an average lifespan. But what if you don’t? What if your health is poor or you have a family history of dying at a relatively young age? If so, you might be much better off claiming Social Security early rather than waiting. While going this route will reduce your benefits on a monthly basis, you will also increase your chances of coming away with a higher total. lifetime advantage.
Let’s say you qualify for a monthly Social Security benefit of $ 1,500 at an ARF of 67. If you deposit at 62, you’ll get $ 1,050 a month instead, and you will break even around 78 1 / 2. If you don’t expect to live to age 78 and a half, you are better off claiming benefits well before age 70. In fact, in this scenario, you should claim Social Security as soon as you are allowed to.
Look at the big picture
Delaying your Social Security file until age 70 and increasing your benefits on a monthly basis is a great idea if you think you will live a relatively long life. But if you are not sure, you better register much earlier. That way, you’ll at least have some peace of mind knowing you’re getting these perks, and if you end up living longer than you expected after claiming perks early on, that’s certainly a decent consolation prize.
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