If you’re at the age where retirement is in sight, or if you’ve already retired, it is important to learn about your benefits and more importantly, when to file. The earliest age you can claim your social security is 62, and the latest age is 70. However, it’s important to note that when you file for Social Security makes a difference and your full retirement age becomes increasingly important. For instance, if you were born in 1960 or after, your full retirement age is 67. The attraction to waiting until you’ve reached your full retirement age is that you can claim your base benefit amount in full, which causes a lot people to wait.

1. You need the money

Say you’re in your early to mid-60’s and having trouble keeping up with daily expenses but haven’t reached your full retirement age of 67. Should you file for your Social Security benefits to keep up with living expenses? Well, perhaps not because if you claim before you reach your full retirement age, you will lock in a reduced benefits check. But while reducing those payments isn’t ideal, going into debt so late in life is a far more dangerous project.

For instance, if you still have debt with a substantial interest rate, it may be better to file for Social Security now in order to pay off that debt. Remember, for every year you take Social Security early, you’ll lose 6.67% of your benefits for up to three years, and then 5% a year thereafter. Taking this loss on your benefits could be worthwhile if you have credit card debt that is racking up 15% or 20% of interest month after month.

2. Your health is poor

If you don’t plan to live for another couple decades, then filing early is probably the better choice. Yes, you will permanently lock in a reduced benefits check but the math is actually in your favor. Let’s say that you’re eligible for $1,500 a month in benefits if you were to file at age 67, your full retirement age. Meanwhile, filing at age 62 will reduce those benefits by 30%, decreasing your monthly check to just $1,050. But if you live to the age 78.7, you’ll basically break even regardless of filing at 67 with a monthly check of $1,500 compared to filing at 62 with a monthly check of $1,050.

It’s never a comfortable thing trying to predict your own life expectancy, but it’s also important to be realistic about the state of your health. Just remember, claiming early can work in your favor if you don’t end up living all that long.

3. You’re afraid Social Security will run out

It’s important to note that although the Social Security program is facing a deficit, it won’t run out of money for at least another 17 years. This means Congress has almost two decades to come up with a plan to address the program’s funding issues. Regardless, incoming tax revenue will still be enough to pay for 79% of scheduled benefits. So even if you’ve reached your full retirement age of 67 and want to “get in before it’s too late,” that’s actually not a good reason to file. If you hold off a few years, until age 70, you could catch that 8% boost and have more money to enjoy for the years to come.

Though taking Social Security at 67 makes sense for some people, these are three scenarios where it just isn’t a smart move. Before you file for benefits, think about the advantages and drawbacks of claiming them at various ages. This way, you’re more likely to arrive at the decision that’s right for you!

If you have any questions about Social Security, let Blue Oak CPA give you the answers. Contact us today.