If I Could Tell All Retirees 1 Thing About Social Security, I'd Say to Do This Before You Claim Benefits

Older Americans get choices when it comes to claiming Social Security. The earliest age you can file for benefits is 62, and waiting until full retirement age means avoiding a reduction in your monthly paycheck. You can also delay Social Security past full retirement age for a larger benefit each month for life.

Not surprisingly, a lot of people opt to claim Social Security early to get their money sooner. Doing so could, in some cases, result in the highest possible lifetime payout, despite a reduced benefit on a monthly basis.

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However, no matter what filing age you're leaning toward for beginning to collect Social Security benefits, there's one key move to make before claiming them. Failing to do so could mess up your retirement in a serious way.

You need a financial plan

Retirement represents a big shift in not just your schedule, but your finances. You're going from earning a paycheck from a job to living on your savings and however much Social Security pays you.

Of course, you may have other income sources at your disposal. The point, however, is that the way you receive your income changes once you retire, so it's important to know what your new financial reality looks like before claiming benefits. Having that information could help you land on the most suitable filing age.

The first thing to do is evaluate your savings before claiming Social Security. But don't just look at the number you've accumulated in your 401(k) or IRA -- instead, figure out a safe withdrawal rate. From there, determine how much monthly or annual income your nest egg will give you.

As a basic example, say you're retiring with $1.5 million and you think a 3.5% withdrawal rate is safe for you. That will leave you with $45,000 a year, or $3,750 per month.

Next, think about what your monthly expenses will look like in retirement, based on your desired lifestyle. Don't just account for essentials like housing, healthcare, and food. Also think about how you'll want to spend your days and how much those hobbies will cost.

Once you have that information, you'll see what monthly income is optimal and how much of that your savings can provide. From there, it's a matter of doing the math to see which filing age gives you the Social Security benefit that makes the numbers line up.

A decision you shouldn't rush into

It's exciting to reach your 62nd birthday and be eligible for Social Security after years of paying into the program. But before you submit your claim for benefits, really think through the financial implications. Running the numbers on your nest egg and mapping out a budget could help you file for Social Security at just the right time -- whether that means signing up early, late, or right on time at your exact full retirement age.

If you're still struggling with the decision, it probably wouldn't hurt to consult a financial advisor. They can help you not only run the numbers, but understand the pros and cons of getting your money at various ages.

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