One of the most critical decisions you'll make in the course of retirement planning is deciding when to file for Social Security. Though your benefits themselves are calculated based on your 35 highest years of earnings, the age at which you start taking them will impact your monthly payments. If you claim Social Security at full retirement age, or FRA, you'll get the exact monthly benefit your earnings record entitles you to.
This is what full retirement age will look like for you:
Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and after
But you don't have to file for Social Security at FRA; you can start taking benefits as early as age 62, or as late as age 70. Claiming ahead of FRA will get you your money sooner, but reduce your benefits at the same time. Filing after FRA will boost your benefits, but you'll wait longer to get them. In fact, no matter how you look at it, each potential Social Security filing age has its potential drawbacks. Talk about making an already difficult decision even more taxing.
There isn't an ideal Social Security filing age
If there were a single Social Security filing age that experts considered the gold standard, seniors would have an easier time deciding when to take benefits. But the truth is that no such age exists, because the decision to claim Social Security is highly personal, and your choice should be based on your own needs and circumstances, not some universal guideline.
So here's what you need to know. Age 62 gives you your benefits as early as possible, but the clear downside is the reduction you'll face for filing ahead of FRA. How substantial a reduction are we talking? If your FRA is 67 and you file at 62, your benefits will drop by about 30%. That might sound like a hard hit, but if you're out of work and need the money, you might be better off claiming benefits than racking up costly debt later in life. Furthermore, if you don't need the money, but rather want it, to enjoy the earliest stage of your golden years, that's reason enough to take that hit but get your cash sooner rather than later.
And if your health is poor, 62 is generally considered the smartest age to file for Social Security. If you don't end up living a long life, you'll get the most out of the program by starting benefits as soon as you're able to.
Filing at exactly full retirement age is also a mixed bag. While you won't have to worry about a reduction in benefits, you won't boost those payments, either. And while you won't wait the maximum amount of time to get your money, you will have to sit tight for a period of four to five years (depending on your exact FRA) from the time you're eligible to start collecting.
Then there's filing at 70. If you're low on savings going into retirement, you'll often hear that waiting until the latest age possible to claim benefits is a smart move, as it means increasing your payments for life. The downside, however, is waiting eight years to get money you could've very well accessed sooner. And, if your health is in bad shape, you might lose out on lifetime income from Social Security by filing as late as possible.
The takeaway? There's no perfect age to file for Social Security, so what you'll need to do when making your decision is evaluate the pros and cons, and decide which outweighs the other. A major reduction in benefits might be worth it to you if it also means getting your money sooner, so if that's how you feel, go ahead and file at 62. On the other hand, if you know you want to score the maximum benefit possible based on your earnings record, then it's worth waiting and filing at 70. And if you feel that splitting the difference makes the most sense given your circumstances, you might settle on filing at FRA.
The point, either way, is to think about the advantages and drawbacks of claiming Social Security at various ages, consider your financial needs, and act accordingly. Putting thought into the decision to file for benefits is a much smarter move than choosing an age randomly or seeing what your friends are doing and following suit.
The $16,728 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.