3 reasons not to file for Social Security at full retirement age

Countless seniors today depend on Social Security to pay the bills in retirement. If you're still working but are getting close to that stage of life, it's important to develop a filing strategy that helps you make the most of those benefits.

Now, as you may or may not be aware, your Social Security benefits themselves are calculated based on how much you earned during your top 35 working years. The age at which you claim those benefits, however, can cause that number to go up, go down, or stay the same.

If you file at full retirement age -- which for today's workers is 66, 67, or 66 and a certain number of months -- you'll get the exact monthly benefit you're entitled to based on your earnings history, without any reductions or increases. File before full retirement age, however, and your payments will go down for each year you jump the gun (keeping in mind that the earliest you can claim benefits is age 62). Then there's the flipside: If you file for benefits after your full retirement age, you'll snag an 8% boost for each year you hold off, up until age 70, at which point that incentive runs out.

You'll often hear financial experts speak of the importance of taking benefits at full retirement age, but I'm here to tell you that 66, 67, or 66 and a number of months may not necessarily be the best choice for you. Here are a few reasons it pays to file for benefits at a different age.

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1. You're forced to stop working sooner than expected

Many of us imagine ourselves working well into our 70s. In fact, 25% of today's workers have that goal. But just because you think you'll work until a certain age doesn't mean you'll get to. A surprising 60% of U.S. employees are forced to retire earlier than planned, and the reasons run the gamut from personal health issues to layoffs to needing to care for loved ones. Therefore, if you find yourself out of a job and don't have enough savings to pay your living expenses, it makes sense to file for Social Security before full retirement age.

Of course, as stated above, the downside to doing so is that you'll lose a portion of your benefits. If your full retirement age is 67 but you take benefits at 62, you'll reduce each monthly payment by 30%. But that's a far better solution than racking up costly credit card debt because you don't have the money to otherwise get by.

2. Your health is poor

Here's a little-known fact about Social Security: The program is designed to pay you roughly the same lifetime benefit regardless of when you initially file. The logic is that any money you lose by claiming benefits early is offset by the greater number of payments you collect. But that formula makes one key assumption: that you live an average lifespan. If your health is poor, and you have reason to think you won't live as long as the average senior, then it generally pays to file for benefits as early as you possibly can.

Imagine you're entitled to $1,500 a month in benefits at age 67. Filing at 62 will reduce each payment to $1,050, but you'll collect 60 more payments. If you end up living until about 78 1/2, you'll walk away with the same total lifetime payout whether you file at 62 or 67. But if you only live until 75, you'll come out nearly $20,000 ahead in your lifetime by filing as early as possible.

Obviously, none of us can predict our own lifespan, but if you have reason to believe you're looking at a shortened life expectancy, it pays to think about filing for benefits ahead of full retirement age. On the flipside, if your health is fantastic and your parents, grandparents, and great-grandparents all lived well into their 90s, it pays to consider holding off on benefits past full retirement age.

3. You're counting on Social Security to provide most of your retirement income

Countless older workers today are horrendously behind on retirement savings. The average household aged 56 to 61, for example, has a median savings balance of just $17,000, which is hardly enough to live on. If you're nearing retirement with not a lot of money stashed away, and you know you'll need Social Security to cover the bills as a senior, then it makes sense to delay benefits past full retirement age and grab the 8% boost we talked about above. This especially holds true if your health is decent and you're not willing to work part time in retirement to make up for your absent savings.

Though there are plenty of good reasons to sign up for Social Security at full retirement age, there are certain scenarios where that just won't make sense. Think about the implications of filing at full retirement age versus another age, and pull the trigger based on your personal circumstances.

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