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delaying your social security

Should I Delay Filing for Social Security?

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In a rush to file for Social Security benefits at age 62? Many people are, but slow down and do the math first – or you might regret it.

Kiplinger’s recent article entitled “3 Reasons to Wait Until 70 to Start Taking Your Social Security Benefits” provides three reasons why delaying taking your Social Security benefit to age 70 is a decision you may want to consider.

  1. You’ll Receive a Larger Monthly Social Security Check If You Wait Until 70. Claiming Social Security before full retirement age (FRA) means a reduction in benefits — as much as 25% to 30% less than you would have received if you had waited. The resulting increase or decrease in your monthly use is permanent.

However, suppose you wait to take your benefits until after your FRA. In that case, Social Security will add an 8% delayed retirement credit to your eventual monthly payout each year you hold off, up until age 70.

  1. You May Be Receiving these Benefits for a Long, Long Time. Life expectancy is a significant factor in Social Security planning. While you can’t predict how long you’ll live, the CDC’s most recent figures say the average American who makes it to age 65 can expect to live another 19 years. Note that if your Social Security benefit at 70 is more than 75% higher than your benefit at 62, you’re going to have a lot more money to take care of your needs as you age.

If you’re married, the lower Social Security payment will go away when one of you dies. Suppose the spouse with the more significant Social Security wage history delays as long as possible to file for benefits. In that case, they will leave behind a more substantial advantage for the surviving spouse.

  1. You Could Help Lower Your Taxes. Many people don’t realize that they could wind up paying federal income taxes on as much as 85% of their Social Security benefits. If you don’t have much taxable income in retirement, you may not have to pay federal taxes on your Social Security benefits.

However, if you’re like many Baby Boomers — you may have a sizeable amount of your retirement savings in tax-deferred IRAs or 401(k)s — and the federal income taxes on those savings could be hefty.

If you aren’t sure which Social Security claiming strategy is the best fit for your needs and goals, talk to an experienced estate planning attorney knowledgeable about retirement income planning and, specifically, Social Security benefits.

Reference: Kiplinger (Sep. 9, 2021) “3 Reasons to Wait Until 70 to Start Taking Your Social Security Benefits”