If you have paid Social Security taxes, you can apply for retirement benefits when you reach the age of 62. You will receive a larger monthly Social Security payout if you wait until you reach your full retirement age of 66 or 67. Individuals who delay benefits until they reach the age of 70 will earn the highest monthly amount allowed. Social Security cannot be deferred once you reach 70.
Here are some suggestions if you wish to delay receiving Social Security benefits until the age of 70:
Be aware of what you will receive
Spend Down Other Retirement Accounts
Make a financial plan
Continue working
Reduce your living expenses
Consider your partner
Be Aware of What You Will Receive.
The amount you get is affected by the year you were born, the pay you earned throughout your working years, and the age you begin receiving Social Security. You will get delayed retirement credits for every year you delay claiming Social Security payments over your full retirement age, says Brandon Ashton, director of retirement security at Cornerstone Financial Services in Southfield, Michigan. These delayed retirement credits can add up to 8% in simple interest increases yearly.
The monthly benefit amount increases every year until the age of 70. If you are 66 years old and wait until 70 to apply for Social Security, you may expect to get 32% more money. Your Social Security statement includes an estimate of how much you might anticipate earning if you begin receiving benefits at certain ages.
Spend Down Other Retirement Accounts
While you wait for Social Security, you may have retirement funds that may be used, such as a 401(k) or an IRA. Never take more than you need, and be sure this method benefits you in the long term, Ashton advises.
Examine your cash reserves and conveniently accessible savings accounts. Any retiree should build a cash reserve of at least 12 months’ worth of spending before retiring, says David Edmisten, founder and lead adviser of Next Phase Financial Planning in Prescott, Arizona. With this amount, one may cover all of their needs without having to withdraw from assets or begin receiving Social Security payments.
You can delay applying for Social Security for three to five years while accessing your savings and investment accounts. According to Edmisten, retirees should seek to employ CD and bond interest, dividends from dividend-paying equities, and perhaps even selling valued assets they’ve held for more than a year to create more income for retirement expenditures.
Make A Financial Plan
As you plan your budget, consider an annuity to augment your income in the future years. Ashton explains that annuities are insurance company contracts that give a guaranteed income for life in exchange for a flat sum payment. There are several sorts of annuities, and you will need to have adequate assets upfront in many circumstances. If you retire before age 70, you may be able to set up annuity payments. An example is someone retiring at 55 and creating a 15-year fixed term definite annuity, explains Kevin Lao, founder of Imagine Financial Security in Jacksonville, Florida. This income will bridge the gap until 70, when Social Security benefits commence. These annuities can be paid for with either retirement or non-retirement funds.
Continue Working
If you are in good health, you may be able to work past the age of 65 to preserve your home and lifestyle. Most individuals have their peak earning years immediately before retirement, adds Ashton. Waiting an extra year or two can help you earn delayed retirement credits while also contributing to the growth of your retirement savings. Over 50s can contribute $6,500 to their 401(k), 403(b), or 457 plans in addition to the $20,500 contribution limit for 2022. You’ll also be able to contribute an additional $1,000 to a Roth or regular IRA, up from the current cap of $6,000.
Reduce Your Living Expenses
Reduce your monthly costs to stretch your funds and live on less while you wait for Social Security to begin at 70. Downsizing is one method of lowering home expenditures. You may think about selling your house and getting a cheaper house or moving to a cheaper city during retirement, Lao suggests. This might result in a tax-free cash inflow that you can utilize to bridge the income gap to Social Security. The principal residence tax liability exception is $500,000 for a married couple and $250,000 for a single person. Paying off high-interest debt, canceling online subscriptions, and traveling and eating out less regularly are some more methods to save money.
Consider Your Partner
Find out which benefit you will receive if you and your spouse are eligible for Social Security benefits. You might begin receiving the lesser benefit and postpone the larger payout. You’ll want to postpone the greater of the two advantages until you’re 70, Lao advises. The survivor benefit entitles the surviving spouse to the bigger of the two rewards. That way, the surviving spouse will receive the maximum benefit for life, Lao explains.