These 3 Factors Should Influence Your Social Security Statement – Motley's Fool

Chances are, social security will be a major source of income for your retirement, which is why the decision to file should not be taken lightly. Eligible seniors are entitled to an eight-year period to claim benefits that start at age 62 and end at age 70 (technically, you do not have to apply before the age of 70). years, but there is no financial reason to wait after this moment). In the middle of this window, you see the age of retirement, or FRA, which corresponds to the age at which you are entitled to the full monthly benefit to which your income history entitles you. Here is what this age looks like, according to the date of your birth:

DATA SOURCE: ADMINISTRATION OF SOCIAL SECURITY.

Many older people prefer do not wait until FRA can claim benefits and file it as soon as possible at the age of 62. This will, however, result in reduced benefits. In fact, for every month If you produce before FRA, your benefits take a hit. File well before FRA, and these benefits will take a pretty hard hit – 30%, in fact, if you claim social security at age 62 with an FRA of 67.

On the other hand, while waiting for your FRA to claim benefits, you will accumulate deferred retirement credits that will increase your benefits by 8% per year until age 70, when these credits will stop accumulating. Depositing social security at 70 with an FRA of 67 will therefore increase your benefits by 24%.

Clearly, the age at which you sign up for Social Security will determine the monthly income you will receive when you retire. As such, be sure to keep the following factors in mind when making a decision.

1. Your income level

You are authorized to collect a pay check and to receive social security benefits at the same time. But unless you have already reached FRA, it will reduce your benefits in two ways.

First, you will be struck by the overall reduction that comes into play when you deposit before the FRA. Second, if your earnings exceed a certain level, some of your benefits will be withheld (though not permanent – they will be added to your monthly payments once you reach the FRA). For the current year, this second part comes into play if your earnings exceed $ 17,640. If you reach FRA later in the year, this income limit is higher: $ 46,920. Therefore, unless you really If you need social security money right away, it can be profitable to trust your regular salary and let your benefits increase.

2. Your level of savings

Social security has never been designed to support retirees. This is why workers are encouraged to build independent savings in order to have enough money to pay their bills once they have stopped working. However, many Americans are saving for the future and are retiring with little money. If you are one of them, you probably depend a lot on Social Security once your career is over. And if that's the case, it means you have to make every effort to file as late as possible. In this way, you will increase your benefits and get the highest possible monthly payment based on your income.

3. Your health

An interesting aspect of Social Security is that it is designed to pay you the same total amount of the lifetime benefit (that is, the total sum of all your monthly payments), regardless of when your statement. Here's how it works, in theory: suppose your FRA is 67, but you apply for Social Security at age 62, which would reduce your monthly payments by 30% while collecting 60 more in your life. In theory, these two points should cancel each other out, which would create a break-even point.

There is just one problem: you have to live an average life expectancy for this formula to work. If you die earlier than the average senior, you will lose money waiting to file your return and you will reap more in your life by taking benefits as soon as possible. And if you die later As the senior way, you will get more social security by filing as late as possible.

Therefore, you must really evaluate your health when you decide to claim benefits. Although your health is not an absolute predictor of when you are going to pass, it may give you an indication as to whether or not you are likely to live a long life, and from there you can decide the right time . drop.

Think about your employment situation and your income, your level of savings and your state of health before making the jump and subscribe benefits. The more you think about claiming social security, the more likely you are to reach the right age.