When Should You Claim Social Security if You Have Plenty of Savings?

A lot of people approach their Social Security claiming decisions coming from a place of vulnerability due to not having much or any retirement savings. And if you’re in a situation where Social Security is expected to become your main source of retirement income, there’s a lot riding on your filing choice.

When you have plenty of retirement savings, it takes some of the pressure off. You should still, of course, aim to file strategically. But the thought process might change if you’re planning to use Social Security as secondary income in retirement, as opposed to relying on it heavily.

With that in mind, here are a couple of options you can look at for claiming Social Security when you’re starting off with a robust IRA or 401(k) balance.

File early to get the money sooner

The Social Security benefit you’re entitled to each month in retirement is based on your personal earnings history. But your filing age determines whether that benefit is reduced, paid in full, or boosted.

If you file at full retirement age, which is 67 for anyone born in 1960 or later, you get your exact monthly benefit based on your wage record. If you file at the earliest age of 62, you face a 30% reduction compared to waiting for full retirement age.

That’s not necessarily a terrible thing, though, if you’re not overly reliant on Social Security. And it could be smart to claim benefits at 62, or at some point ahead of full retirement age, if that money allows you to enjoy your earlier years of retirement to the fullest.

If you’ve amassed a lot of savings, it means you’ve worked hard and probably sacrificed plenty during your career to get to that point. Filing for Social Security early could mean getting to make the most of those benefits while your health is in better shape. So if your ability to cover your bills isn’t compromised by a reduced benefit, there’s no reason not to file early.

Delay your claim for more peace of mind

In retirement, money doesn’t just buy you things. It can also provide peace of mind.

Even retirees with a lot of savings worry about depleting their nest eggs eventually. Delaying Social Security could help you feel more financially stable, even if those benefits are just a cushion.

For each year you delay your Social Security claim past full retirement age, up until 70, your benefits grow 8%. You may not need the extra money to cover your costs. But having larger benefits could bring you more peace of mind.

First, Social Security benefits have built-in inflation protection. Each year, they’re eligible for a cost-of-living adjustment. The larger your benefits are to begin with, the more valuable those inflation adjustments are apt to be on a dollar basis.

For example, let’s say your full retirement age benefit from Social Security is $2,500. Waiting until 70 gives you $3,100 instead. A 3% COLA applied to a Social Security benefit of $3,100 is $93, versus $75 for a benefit worth $2,500.

Now if you have millions saved for retirement, you might think, “Who cares?” And that’s valid. A $15 monthly difference may not matter if you’re getting the bulk of your income from your IRA.

Bu remember, larger Social Security benefits buy you some longevity protection. If you live longer than planned and your nest egg starts to dwindle, those bigger monthly checks could help pick up the slack.

Ultimately, there’s no right or wrong answer when it comes to claiming Social Security. If you’re starting with a large pile of savings, your decision could really go either way. The key, therefore, may be to decide what’s more important — having access to the money sooner for enjoyment purposes, or boosting peace of mind in the long run.