If you’re stressing over the decision, this may be a good middle-ground solution.
Deciding when to sign up for Social Security is a tough thing. If you file at age 62, the earliest possible age to claim benefits, you’ll reduce your monthly Social Security payments on a permanent basis. And that could lead to financial struggles throughout retirement. Plus, if you end up living well into your 90s, you’ll end up with a lot less money from Social Security all-in by filing as early as possible.
On the other hand, if you sign up at the latest possible age of 70, you’ll get a boosted monthly benefit. But then, you’ll risk shorting yourself on lifetime income if you end up passing away at a younger age than expected. (To be clear, you can technically file for Social Security after turning 70. But since there’s no financial upside, 70 is usually referred to as the latest filing age.)
If you’re torn up over your Social Security filing decision, you may want to land on age 67. It could end up being your least risky option.
When you’re worried your decision won’t work out well
Age 67 is full retirement age (FRA) for Social Security purposes for anyone born in 1960 or later. And FRA is when you’re entitled to your complete monthly Social Security benefit based on your personal income history.
The reason you may want to settle on age 67 as your filing age is that you’re not reducing your monthly benefit by signing up then, but you’re not boosting it. You’re also not filing for benefits too early, but you’re not waiting too long.
All told, it’s a good middle ground solution. And it may help minimize some of the risks associated with claiming Social Security earlier or later.
Let’s say you’re entitled to $2,000 a month from Social Security. If you sign up for benefits at age 62 and live until age 76, you’ll come out ahead financially by over $19,000 compared to filing at FRA. But if you live until age 80, filing at 62 will mean collecting $24,000 less in Social Security in your lifetime.
Meanwhile, if you sign up for Social Security at age 70 and live until age 78, you’ll lose out on almost $26,000 in lifetime income by not signing up at FRA. But if you live until age 86, filing at age 70 puts you a little more than $20,000 ahead.
The problem, of course, is that these are all random ages, and it’s pretty much impossible to know what age you’ll live to. So a good bet may be to just file for Social Security at age 67 and hedge your bets that way.
An exception to the rule
Filing for Social Security at age 67 could be your optimal choice when you don’t want to risk losing out on benefits to too large a degree. But you may want to file for Social Security as early as possible if, come age 62, your health is exceptionally poor. In that case, filing early is more likely to result in a higher lifetime payout. And that’s really what you want from Social Security.
It’s easy to get hung up on what your monthly benefit will look like based on various filing ages. But a better bet is to think big picture and focus on lifetime income. And if you’re not sure what the best choice is in that regard, filing for Social Security at 67 may be your most logical option.
