In the course of planning for retirement, one of the most critical decisions you may face is when to enroll in Social Security. If you apply for benefits at full retirement age (FRA), which kicks in at age 66, 67, or somewhere in between, depending on your year of birth, you won’t face a reduction or increase. Rather, you will get the precise monthly benefit for which your earnings history makes you eligible.
That said, you can sign up for Social Security up to five years before the FRA, starting at age 62. For every month you claim benefits before the FRA, your benefits are reduced, but you get your money sooner.
On the other hand, for every month you delay Social Security beyond the FRA, your benefits get a boost. In fact, you can postpone filing until age 70 and simultaneously increase your benefits. And if you wait that long, you’ll end up with a 24% to 32% lifetime increase, depending on your specific FRA.
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Clearly, there is much to be gained financially by delaying your Social Security claim. But if that’s the route you decide to take, you should also have a backup plan.
Why claiming Social Security later may not work
Your employment status may not affect your Social Security filing if you retire with a large amount of savings. But many seniors need to keep working to make it feasible to delay Social Security.
If that’s the boat you’re in, you can try to postpone the FRA filing, but you can’t assume that plan will work. This is because older employees often have to leave the workforce earlier than planned, whether due to health problems, layoffs, or other matters beyond their control. So if you have a larger Social Security benefit to fund your retirement, you may want to put a backup plan in place.
Now that backup plan could mean working part-time in retirement if the need arises. It could also mean downsizing a smaller house or renting a part of a larger one that you decide to stay in.
But either way, it’s important to know what steps you’ll take to financially compensate if you can’t delay your Social Security claim despite every intention of doing so. That way, you won’t have to struggle in retirement.
Your health should also be a factor
While delaying Social Security could mean you get a lot more money from the program each month, it may not necessarily result in you getting more each month. lifetime base. To achieve the latter, you will generally need to live a longer life. And if your health isn’t great before you retire, that may not happen.
As such, before you commit to delaying Social Security, think about whether that’s feasible and also whether it really makes sense from a financial standpoint. You may decide that claiming benefits at a younger age is actually a better way to go.
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