A great deal of SSA retirement experts recommend waiting until age 70 to claim Social Security benefits especially if you want a larger monthly payment. The main reason for doing that is that workers will maximize their retirement benefits by delaying Social Security.
Not to mention the fact that it provides some additional tax-planning benefits for more affluent households. However, there are still some disadvantages to waiting until you’re past your 60s to start collecting Social Security. These distressing facts may help show the realities that average American seniors in retirement might face in their filing decisions.
Things to take into account if you file for Social Security at 70
There’s always a possibility that you might not live as long as you expected to fully benefit from delaying Social Security until age 70. Nevertheless, those in average or better health typically gain more from Social Security by waiting until they reach 70.
- Health Considerations: If you are in excellent health, waiting until 70 can result in higher lifetime benefits.
- Spousal Benefits: You and your spouse might be able to receive more in lifetime benefits if you file earlier, depending on your specific circumstances.
- Tax Planning: Wealthier households may find additional tax-planning benefits by delaying Social Security.
Ultimately, the decision to claim Social Security is a personal one and should be made after considering various factors, including your health, financial needs, and retirement goals. Remember, what works for one person might not be the best choice for another.
When planning for retirement, it’s essential to factor in both your spouse and your total household income. This is crucial because it involves understanding spousal benefits and survivor benefits.
Maximizing Social Security Spousal Benefits
Spousal benefits can be substantial, potentially worth up to half of what your spouse would collect at their full retirement age (FRA). These benefits max out when you reach your own FRA. Therefore, it might be advantageous to claim benefits earlier to maximize what you can receive from your spouse’s benefits, even if it means filing well before turning 70.
Understanding Survivor Benefits
Survivor benefits are designed to ensure that a lower-earning surviving spouse can receive the higher amount that the deceased spouse was entitled to. Because of this, it might make sense to claim benefits as early as age 62.
If the low-earning spouse claims at 62 while the high-earning spouse delays their claim until age 70, the overall benefits over their combined lifetimes could be higher, depending on the longevity of the higher-earning spouse.
- Spousal Benefits: Worth up to half of your spouse’s full retirement amount.
- Survivor Benefits: Ensure the surviving spouse gets the higher amount received by the deceased spouse.
- Timing: Claiming benefits at different ages can affect the total benefits received.
By carefully considering these factors, you can better plan your retirement strategy to maximize the benefits for both you and your spouse. Understanding the nuances of spousal and survivor benefits can significantly affect your financial well-being in retirement.
When it comes to claiming Social Security benefits, things can get quite complicated when a spouse is involved. Strategies that might seem straightforward for an individual can become much more intricate with two people in the mix.
Considering Your Heirs
Though waiting until you turn 70 to claim Social Security benefits can result in a larger monthly payment, it’s important to remember that these benefits are not transferable to your heirs. Instead, during your 60s, you would need to rely more on your retirement investments—which can be passed down—to cover your expenses. This early withdrawal from your portfolio might mean there is less money to leave for your heirs when you die.
The Aggressive Investor’s Approach
Some aggressive investors might choose to start collecting benefits earlier, aiming to out-invest the growth of their Social Security benefits. For every dollar you receive from your monthly Social Security check, that’s one less dollar you need to withdraw from your investment portfolio.
If the market performs according to its historical averages, this strategy could potentially leave you with more money in your investment accounts compared to waiting to maximize your Social Security benefits later on.
Ultimately, the decision on when to claim Social Security benefits is highly personal and depends on various factors including your financial situation, health, and retirement goals. Carefully weighing these considerations can help you make the best choice for you and your family’s future.
If you’re considering this strategy, here’s a fair warning: it’s not without risks. The stock market doesn’t move in a straight line. A poor sequence of returns can leave you with less to pass on to your heirs. In contrast, delaying your Social Security benefits offers a predictable and relatively strong return compared to other low-risk investments.
Covering Medicare Premiums
Most people who stop working and enroll in Medicare don’t have to worry much about Medicare Part B premiums. That’s because the Social Security Administration automatically deducts these costs from your monthly check when you enroll. However, if you decide to enroll in Medicare while delaying your Social Security benefits, you’ll need to pay these premiums out of pocket.
You’re Still Paying for Medicare
It’s important to note that you’re still paying for Medicare either way. The difference lies in whether you’re paying from your own bank account or receiving a smaller Social Security check each month.
To sum up:
- Stock Market Risks: The stock market is unpredictable and can affect your heirs’ inheritance.
- Social Security Benefits: Delaying benefits provides a predictable and strong return.
- Medicare Premiums: If you delay Social Security, you’ll need to pay Medicare premiums out of pocket.
- Regardless, you’re paying for Medicare, either from your own bank account or via a reduced Social Security check.
Understanding these points can help you make a more informed decision about your financial strategy.
