Do You Intend to Postpone Receiving Social Security? You Must Have a Plan B

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Holding off on Social Security could result in a higher monthly benefit for the rest of your life.

Don’t expect your choice to go off without a hitch.

When it comes to retirement planning, one of the most important decisions you’ll have to make is when to enroll in Social Security. You will not face a reduction or boost if you claim benefits at full retirement age (FRA), which is 66, 67, or somewhere in between depending on your birth year. Rather, you’ll receive the exact monthly benefit for which your earnings history qualifies you.

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Having said that, you can apply for Social Security up to five years ahead of FRA, beginning at the age of 62. Your benefits are reduced for each month you claim benefits ahead of FRA, but you get your money sooner.

On the other hand, for each month you postpone Social Security past FRA, your benefits increase. In fact, you can postpone filing until the age of 70 and grow your benefits at the same time. And if you wait that long, you’ll get a life boost ranging from 24% to 32%, depending on your FRA.

Delaying your Social Security claim clearly has a lot of financial benefits. However, if that is the path you choose, you should also have a backup plan.

Why claiming Social Security later in life may not be a good idea

If you retire with a sizable nest egg, your employment status may have no bearing on your Social Security filing. However, many seniors must continue to work in order to postpone Social Security.

If that’s the case, you can try to postpone filing until after FRA, but don’t count on it working out. This is because older workers frequently have to leave the labor force earlier than expected, whether due to health issues, layoffs, or other factors beyond their control. As a result, if you’re counting on a larger Social Security benefit to fund your retirement, you should consider having a backup plan in place.

Now, if the need arises, that backup plan could entail working part-time in retirement. It may also imply downsizing to a smaller home or renting out a portion of a larger one that you decide to keep.

In any case, it’s critical to know what steps you’ll take to compensate financially if you’re unable to postpone your Social Security claim despite your best efforts. You won’t have to struggle for the rest of your life if you plan ahead of time.

Your health should also be considered.

While delaying Social Security may result in you receiving a lot more money from the program on a monthly basis, it may not necessarily result in you receiving more over your lifetime. In order to achieve the latter, you will generally need to live a longer life. And if your health isn’t great when you retire, that might not happen.

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As a result, before you commit to delaying Social Security, consider whether it’s feasible, as well as whether it makes financial sense. You may decide that filing for benefits at a younger age is a better option.

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