Social Security benefits are a helpful addition to your monthly retirement income. But while you can start claiming benefits at age 62, you might not want to — especially if you picked up some side gigs to supplement your retirement funds.
Most important, though, is waiting to claim your benefits until you’re 65 or 70 or at least full retirement age can make a big difference to your bottom line throughout your retirement years.
So should you wait to claim benefits, or should you opt to start receiving payments as soon as possible? These eight reasons for delaying benefits may help you make the most of your retirement.
You want your full Social Security benefit
Claiming your Social Security benefits before you reach full retirement age means taking a cut in the amount of money you’ll receive each month.
For example, if the official retirement age for your age group is 65 and you retire at 62, your overall benefit payments will be reduced by 20%.
To claim your full Social Security benefits, you should wait at least until you reach your full retirement age. That's the best way to avoid throwing away money you’re going to need in retirement.
You’re still working your day job
If you’re still bringing in a paycheck, do you really need a Social Security deposit each month? Or is your current income enough for you to stay afloat?
If the latter, consider pushing back your Social Security benefits until you do actually retire. After all, a few hundred dollars a month might not make or break you while you can still fall back on your career to pay the bills.
However, once you’re living on a fixed income, the payments can make a big difference.
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You want to take advantage of the delayed retirement credit
After you reach your generation’s full retirement age, each year you put off retiring and claiming Social Security increases your benefits by as much as 8% per year.
These delayed retirement credits no longer apply when you reach age 70, so you have a limited number of years to push back retirement and maximize your Social Security payments.
You don’t need the money right now
If you aren’t struggling to make ends meet, now might not be the time to start receiving Social Security benefits.
For one thing, you don’t want to run the risk of spending your Social Security benefits on things you want now instead of things you’ll need later. For another, it’s not worth taking a reduction in benefits to get a check you don’t need to pay the bills.
Plus, if you can wait to receive benefits, the delayed retirement credit will also help your payments go further when you finally start receiving them.
You’re relatively healthy
You can’t predict the future, but if you’re fairly healthy now, odds are good that you’ll be around to spend your retirement funds for a good decade or two.
Since 20 years is a long time to live off a fixed income, your wallet will be happiest if you can delay receiving benefits until it’s no longer possible for you to work full-time.
You’re worried about taxes
Depending on your income level when you start receiving Social Security payments, up to 85% of your benefits may be subject to the federal income tax.
Individuals making between $25,000 and $34,000 will pay taxes on at least 50% of their Social Security payments, while those making more than $34,000 will be taxed on 85% of their benefits.
Once you’re retired and have a much lower income than you do while working, you might not exceed an income level that requires you to pay taxes on your benefits.
You earn more than your spouse does
After you hit your full retirement age, you can start collecting your full Social Security benefit, or you can start collecting 50% of your spouse’s Social Security benefit (whichever amount is higher is the one you’ll take).
If you’re the higher earner in your household, working longer can ensure your spouse’s eventual payments are higher than they would be otherwise.
You’re still working on your retirement savings
Social Security was never supposed to replace your full income in retirement, so retiring early and planning to live off Social Security isn’t a viable option for most people.
Instead, it’s wise to stay in the workforce as long as possible so you can meet your retirement savings goals.
The combination of solid savings and higher Social Security payments will extend your spending power in retirement. Retiring at 62 and relying on Social Security won't.
You’ve contributed to your Social Security benefits for your entire working life. Waiting a little longer to receive them could make your retirement years easier — especially if you decide to retire early.
Before you decide when to claim your benefits, talk to a financial advisor about delaying until you’re closer to 70. The higher payments can make a big difference to your spending power down the line.
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