Why you should reconsider an early Social Security claim

If you’re thinking of claiming Social Security at any point before age 70, be aware that you’re starting your exams earlier than you might be supposed to. And that could be a decision you’ll regret over time.

Here’s why you might want to reconsider an early claim.

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Claiming Social Security before age 70 might leave you with regrets

Although Social Security benefits can be claimed as early as age 62, doing so would result in a significant reduction in your monthly income compared to your potential maximum.

Every retiree has a Full Retirement Age (FRA), which is the age they would have to reach to start receiving their standard Social Security benefit. Deferring benefit entitlement beyond your FRA increases your standard benefit amount until age 70. This is because you avoid early retirement penalties that decrease your check for each month you claim it before FRA, and after FRA you start earning late retirement credits that increase your monthly payment.

Because you can increase your monthly check amount up to 70 each month, you’ll get the largest possible payout by waiting until then. And maximizing the size of your monthly Social Security checks could be crucial for one simple reason: Those benefits are protected from inflation.

In recent years, surges in inflation have meant that many retirees see the purchasing power of their savings dwindling. Although there have been signs of a slowdown recently, inflation is hovering around a 40-year high, with annual price increases regularly exceeding 6%. Soaring prices of goods and services have caused many seniors to lose ground as their conservative investment portfolios have often yielded well below current inflation rates.

This economic phenomenon serves as an important reminder that you can’t necessarily predict what might affect your retirement savings – but you can may Rest assured that as rates rise, Social Security benefits will increase. This makes it a very safe source of income for seniors.

Although Social Security definitely is not enough to live on, maximizing your guaranteed inflation-protected monthly payments is certainly a smart move. If your savings don’t stretch as far as you plan due to rising prices, having extra money in your monthly Social Security check could be very useful.

Is a late claim right for you?

While there are undeniable benefits to having the largest monthly Social Security check possible, you must consider that you are giving up years of income to maximize your payment amount. If you wait until age 70, you waive any money that you would have received from Social Security that you were entitled to between age 62 and the time you actually applied.

Most people end up waiting better. Lifespans have gotten longer since the formula for Social Security benefits was created, so chances are you’re living more than enough to breakeven on foregone benefits. If you were the higher-income spouse, increasing your monthly check due to a delay will also give your spouse larger survivor benefits.

But there are limited circumstances – such as a premature death without a spouse – among which a delayed claim is the wrong choice. In most cases, however, it’s wise to maximize your inflation-linked income by deferring it to get the largest possible Social Security payments. Not This is definitely something you might regret.

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