Tips for delaying receiving social security benefits

Much has been said about delaying social security benefits. There is a significant difference between receiving benefits at the age of 62 and waiting until the full retirement age, and the same is true when receiving benefits at the age of 70. Should you delay? As with most financial planning, it depends.

Key points

  • Social Security Income has some flexibility in the exact time you choose to start receiving benefits.
  • Starting at 62 to receive benefits and waiting until full retirement age or longer can make a significant difference.
  • Working and receiving benefits before the full retirement age may cause you to exceed the annual income limit, at which point benefits will decrease.
  • The question is whether the immediate benefits of cash flow now exceed the greater benefits of waiting.

Do you need money urgently?

The benefits until the normal retirement age (66 years for many people and 67 years for those born in 1960 or later) are about 30% higher than those received at 62 years of age. The income from waiting until the age of 70 is approximately 32% higher than the amount at full retirement age.

If you decide to apply for larger benefits in a few years, do you have other resources to support yourself during this period? This may include retirement accounts, such as 401(k) plans or individual retirement accounts (IRA). What about pensions, taxable investments, or cash? The biggest question is: What is your income in the early stages of retirement?

are you still working?

Part-time or full-time work may be a plus for early retirement, but working and receiving social security benefits before the full retirement age can also cause you to exceed the annual income limit, thereby reducing benefits. The annual income limit in 2022 is US$19,560 (up from US$18,960 in 2021).

Compared with those who are waiting, those who receive social security at the age of 62 face a significant and permanent reduction in benefits.

This means that those who are below the full retirement age for the entire year of 2022 will lose $1 in benefits for every $2 that they earn more than $19,560.

Those who reach full retirement age in 2022 will lose $1 in benefits for every $51,960 or more they earn $3, until the month when they reach full retirement age.Note: The Social Security Administration only calculates income forward Reach full retirement age in the first month.

The annual income limit will disappear at full retirement age, but benefits may still be taxed as high as 85%.

If you are working and in a high-income tax bracket, you may need to defer receiving benefits until your income is low or until you are 70 years old.

Take cash now or get more benefits in the future?

Compared with those who are waiting, those who receive social security at the age of 62 face a significant and permanent reduction in benefits. Each year the recipient waits between the age of 62 and the full retirement age, this decrease will decrease proportionally.

As mentioned earlier, the permanent benefit until the age of 70 is approximately 32% higher than the benefit from the full retirement age. This increase is also proportional, increasing every year from the full retirement age to the age of 70.

Another unknown is life expectancy. As of 2021 (based on 2019 data-the latest available data), the average life expectancy of 65-year-old Americans is 18.2 years for men and 20.7 years for women-if they also receive benefits, it will take a long time to provide additional funds. .

Life calculators and actuarial tables can help determine life. But stay closer to home. For those whose families are not particularly long-lived—researchers seem to be divided on whether family history predicts longevity—or those with diseases that may shorten lifespan, early access to benefits may make sense.

Bottom line

When to receive social security benefits is an important decision as well as a complicated one. Please take enough time and seek advice before deciding which way to go. And pay close attention to changing welfare levels and other changes in social security; these are reviewed every year.

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