Retiring soon? If so, you may be wrestling with the decision of when to file for Social Security. It’s permanent, so it’s a big decision. Once you start receiving benefits, you can’t change your mind.
The timing of your filing also plays a big role in your benefit amount. If you file early, you’ll see your benefits reduced. On the other hand, you could delay your filing, which would lead to an increase in your benefit amount.
You can file as early as age 62. However, your benefit is permanently reduced if you file at any point before your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays.1
You don’t have to file at your FRA, though. In fact, you can delay your filing as late as age 70. For each year you wait past your FRA, your benefit amount increases 8 percent. Conversely, your amount could be reduced as much as 25 percent if you file before your FRA.1
One of the biggest expenses you could face in retirement may not even be on your radar. It’s not health care, taxes or even food costs. It’s inflation.
Inflation is the incremental increase in the price of goods and services from year to year. It’s a natural part of the economy. As the economy expands—and wages and earnings increase—so, too, do prices. The inflation rate fluctuates, but there is rarely a year in which prices don’t increase at all.
While modest levels of inflation can be a sign of a healthy economy, they can also be dangerous for retirees. Consider the long-term impact of even a modest inflation rate. An average annual inflation rate of 3 percent would double your cost of living over a 24-year retirement.
Social Security increases benefits annually through a cost-of-living adjustment (COLA). However, this adjustment may not be sufficient for retirees. For example, in 2017 and 2018, COLA was set to 2 percent. In 2016 it was 0.3 percent, and in 2015 there was no COLA.1