Today I’d like to continue with this video series, which is “Ten Financial Commandments for Retirees.”
And Commandment # 4 is to Claim social security at the right time: Social Security is a crucial income source for many retired Americans. Getting it right is critical for a financially successful retirement. If you are in good health and don’t currently need the cash flow, holding off on claiming Social Security is a smart strategy to mitigate the impact of inflation. Today, full retirement age (or FRA) for a retiree to get their full benefit ranges from 66 to 67, depending on the year you were born. One can claim Social Security as early as age 62, but anything before FRA comes with a reduction in benefits up to 30%. Conversely, Social Security will add an additional 8% delayed retirement credit to your monthly payout for each year, up until age 70, that you hold off on claiming the benefits. That’s a guaranteed annual return of 8% for deferral after your FRA.
Of course, delaying taking social security may not always make sense. For example, health issues and family circumstance may necessitate claiming earlier rather than later. It’s important to speak to your financial advisor to ensure you are claiming social security at a time that makes the most sense for you and your needs.