Postponing Social Security Benefits: 3 Advantages Explained
For many Americans, deciding when to claim Social Security benefits can be a complex decision. One strategy that is gaining popularity is delaying benefits until the age of 70. Here are the top reasons why this approach could be beneficial.
Firstly, delaying Social Security benefits can lead to higher monthly benefits. For each year you delay past full retirement age (typically 66 or 67), your benefit grows by about 8% annually. This means that if your full retirement benefit is $3,377 at age 67, you could receive around $4,873 at age 70[1][3][4].
Secondly, delaying benefits can significantly increase your lifetime income, especially if you expect a longer life expectancy. Those with similar earnings and good health can add hundreds of thousands of dollars to their lifetime Social Security income by waiting until 70[2].
Thirdly, delaying Social Security can be a good strategy if you plan or are able to continue working beyond full retirement age. This allows your benefits to grow while you maintain income from employment, potentially improving your overall retirement finances[3].
Fourthly, delaying Social Security can provide better income security in very old age, helping to mitigate the risk of exhausting other retirement assets[3]. However, it's important to note that this strategy requires having sufficient savings or income sources, like 401(k) or investments, to cover expenses in the meantime[4].
On the other hand, delaying benefits could potentially result in higher taxes on your benefits due to higher provisional income while you're still working[1]. Also, if you have health concerns or a shorter life expectancy, it might be better to claim earlier to maximize total benefits received[3][2].
If you have planned adequately for retirement, you'll likely have enough income from retirement accounts to cover expenses and lifestyle, making it possible to wait until age 70 to claim Social Security benefits[2].
It's also worth mentioning that continuing to work while receiving Social Security benefits before full retirement age may lead to penalties. The Social Security Administration deducts $1 for every $2 of annual income you make over $19,560 if you are below full retirement age[1]. If you reach full retirement age in the same year, the deduction is $1 for every $3 of earnings if your annual income exceeds $51,960[1].
In conclusion, delaying Social Security until age 70 can be a wise decision for those who can afford to wait, have stable financial needs before claiming, and have a high life expectancy. This strategy can help maximize monthly benefits, increase lifetime income, and enhance retirement income security[1][2][3][4]. However, it's crucial to consider individual circumstances before making a decision.
[1] SSA.gov - Retirement Planner [2] AARP - When to Claim Social Security [3] Forbes - The Best Age to Start Taking Social Security Benefits [4] Investopedia - Delaying Social Security Benefits
Delaying Social Security benefits can not only lead to higher monthly benefits, with an increase of around 8% annually for each year delayed past full retirement age, but it can also significantly boost one's lifetime income, especially for those with a longer life expectancy. This strategy, in conjunction with proper personal-finance planning, can help maximize retirement finances and ensure income security in very old age.
On the other hand, investing wisely in personal-finance products or retirement accounts can provide enough income to cover expenses and allow for delaying Social Security benefits until age 70, thereby reaping the benefits of higher lifetime income and an enhanced retirement experience.
