Social Security will probably end up being a pretty important income source for you once you leave the workforce and the paycheck you’ve collected for years goes away. You’re allowed to file for Social Security as soon as you turn 62, though you’re not entitled to your full monthly benefit based on your work history until several years later. As such, if you’re newly eligible for Social Security, here are three important moves to make.
1. See what your estimated monthly benefit looks like
Filing for Social Security at 62 will leave you with a reduced benefit for life. Depending on your circumstances, claiming benefits at 62 could make sense, but before you decide whether to go that route or not, you’ll need to know what your monthly benefit actually looks like. And your annual earnings statement will tell you that.
Each year, the Social Security Administration (SSA) issues workers an earnings statement summarizing their taxable wages for the year. That statement also includes an estimate of benefits at full retirement age.
You can access that statement online by creating an account on the SSA’s website, or look for a copy you may have received in the mail. Once you see what benefit you’re entitled to, you’ll be in a better position to decide whether you can afford to reduce it or not.
2. Figure out how much income your savings will give you
Social Security should not be your sole source of income during retirement. Rather, you should ideally have savings to live on, as well. But if your savings aren’t robust, you may need to lean more heavily on Social Security to cover your bills, so before you decide whether to file as soon as you’re eligible or wait, you’ll need to assess your nest egg and see how much annual income it’s likely to provide.
As a general rule, plan to withdraw about 2% to 4% of your savings balance each year. You can, and should, adjust that withdrawal rate based on your needs and finances, but you can work with this range as a starting point. If you’re sitting on a $400,000 retirement plan balance, sticking to that range will give you $8,000 to $16,000 a year in income outside of Social Security. From there, you can estimate your living expenses and see if you should file for Social Security at 62 or hold off and grow your benefits instead.
3. Talk to your spouse
The Social Security decisions you make could impact your spouse. For example, if you’re much older than your spouse and expect to pass away much sooner, know that the higher a monthly benefit you lock in, the higher your spouse’s survivor benefit will be. You should also coordinate your filing with your spouse if they are entitled to a monthly retirement benefit based on their work record, as it could make sense for one of you to claim Social Security early while the other waits.
Reaching the age of 62 means you’re entitled to collect Social Security — but that doesn’t necessarily mean you should. Weigh your options before rushing to sign up so you don’t regret your decision after the fact.