Social Security: Why You Really Need to Estimate Your Life Expectancy Before Claiming Benefits | Smart Change: Personal Finance

(Morri Bachmann)

Many seniors have a hard time figuring out when to claim Social Security because there are pros and cons to different options. Applying for benefits at age 62, for example, means getting your money back sooner. But it also means lowering your monthly benefits for life.

Waiting until full retirement age (FRA) means not having to face a reduction in benefits. But it also means waiting longer to get your money back. And while applying for Social Security at age 70 means snagging the highest possible monthly benefit you can get based on your salary history, it could mean having to delay retirement.

Now when you sit down to think about the appropriate age to claim it social Security, You might focus on what your monthly gain would look like in each scenario. This is an important thing.

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But that’s not the only calculation you have to make. It’s a good idea to think about how long you expect to live, because that can and should play a role in your decision.

Don’t just focus on your monthly income

The sooner you claim Social Security, the less monthly income you should look forward to. But instead of focusing on monthly income, you should also consider lifetime income — the total amount Social Security pays you during your graduate years.

If you end up living a very long life, you may find that over a lifetime, you advance more financially by delaying Social Security for as long as possible. On the other hand, if you don’t end up living that long, signing up early may be your best bet.

Of course, you can’t definitively predict how long you’ll live because, well, nobody has that ability. But you can make an informed guess based on your health and family history.

If you are in your early 60s and in good shape with no known issues, and your parents are still alive in their 90s, there is reason to believe that you may live longer. On the other hand, if your health has already failed at age 62 and your parents and grandparents all died in their early 70s, you may want to project a shorter lifespan and use that to guide your Social Security filing decision.

This is just one example of how life expectancy calculations work. Let’s say you think you’ll live to age 85. If you were entitled to a $1,700 monthly Social Security benefit in an FRA of 67 and you registered at that time, your total lifetime payment would be $367,200. If you submit a file in age 62, the total return would be $328,440. And if you apply at age 70, the total payout will be $379,440. So in this case, delaying your claim until 70 actually makes more sense.

These numbers look different if you assume you’ll only live to 75. In that case, registering with the FRA will leave you with a lifetime compensation of $163,200. Registering at $62 will leave you $185,640, and registering at age 70 will give you a total lifetime amount of $126,480. So in this case, signing up at age 62 is your best bet.

An important factor to consider

Determining your longevity is not easy. But it is important to do this before claiming Social Security. This way, you’ll be in a better position to get a larger lifetime income – even if it means raising less money on a monthly basis.

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