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Don't file for social security until you've answered these three questions – The Motley Fool

Chances are, Social Security will play a major role in your pension funding. That's why you really need to be strategic in claiming benefits. Here are three key questions you should be able to answer before you start thinking about archiving.

1. Have I reached full retirement age?

Your social security benefits are calculated on the basis of how much you have earned during your time in the workforce (especially the highest paid 35 years at work).

  Older couple at the table with calculator and papers in front of them

Image source: Getty Images.

If you file for benefits at full retirement age, or OFF, you get the exact monthly benefit your income inventory entitles you to. Your FRA is dependent on your birth year, as follows:


Full retirement age




66 and 2 months 4 months


66 and 6 months


66 and 8 months


66 and 10 months



Data source: Social Security Administration .

Having said that, you are allowed to file for social security benefits as early as 62 years. However, claiming benefits before FRA will result in a reduction of monthly social security, and most likely a permanent one. The extent of this reduction will depend on the FRA and how early you file, but in the most extreme scenario (archiving at 62 with a FRA of 67), it can add up to 30% less. Therefore, it often pays to wait until FRA to take benefits, unless you have a compelling reason to file before.

2. Are my savings healthy?

Ideally, social security should only be part of your total retirement income. But if you don't have much in the way of savings, it can ultimately make up the bulk of it. If so, it may not make sense to claim benefits at full retirement age. Rather, you should think about delaying the benefits past FRA. For each year you like, you will add credits that increase your benefits by 8% a year up to 70, where this incentive expires. Therefore, make sure to consider your savings before submitting social security benefits. If you don't have so much egg, it's not that great that delay and increase your benefits can be your best shot to save your pension.

3. Will I continue to work?

A nice feature of social security is that you are allowed to work and collect benefits at the same time. You may need these benefits to supplement your earnings later in life, especially if you have to cut down on working hours due to health problems. Or you can only desire these benefits to enjoy life while you are a little younger.

Having said that, if you submit benefits in front of the FRA, you risk having some of them withheld if your earnings exceed a certain threshold. That limit changes from year to year, but in 2019 you get $ 1 in the benefits held for every $ 2 you earn over $ 17,640. The only exception is that you come to FRA later this year, in which case you can earn up to $ 46,920 without affecting your benefits. From there you will have $ 1 in Social Security for every $ 3 you earn.

Note that these benefits are kept and not lost. The social administration administration will add them to monthly payments when you arrive at FRA. But the reduction in the benefits you encounter by filing early will be money you will lose forever, so if you plan to continue working and expect to earn a decent lifetime, it can pay to keep off claim benefits until you reach FRA. At that time, you can earn as much as you want and still collect your benefits in full.

The decision to archive for social security schemes is not one that should be taken lightly. Make sure you answer these three questions before signing up.

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