Many believe that if they save enough money for retirement, they can reduce their reliance on Social Security later. On the other hand, you can’t be sure that your nest egg will provide a comfortable retirement.
You may have accumulated a million dollars in savings at the end of your working life. However, you may receive much less money than anticipated if you withdraw from your cash reserves too quickly and the market significantly underperforms. And a significant monthly Social Security gain could be a lifesaver for them.
This is why filing for Social Security at the correct time is crucial. Signing up for benefits at age 65 may seem enticing at the time, but it’s a move you may regret deeply.
A person must be 62 years old before they are eligible to begin receiving Social Security benefits. However, once you reach full retirement age (FRA), you will receive your full monthly benefit based on your individual income history. Contingent on the year you were born, FRA is either 66, 67, or 66 plus a certain number of months.
Considering that Medicare coverage starts for those 65 and older, you might think it’s a good idea to start collecting Social Security at that time. Furthermore, it is essential to note that enrolling in both programs simultaneously may facilitate the payment of Medicare Part B costs.
Medical care received in a hospital is covered by Medicare Part A, and this portion of Medicare is provided at no cost to participants (meaning free in terms of premiums — there are still unforseen costs you might incur when you use your Part A coverage, like deductibles for hospital stays). Part B of Medicare, which pays for doctor visits and other outpatient services, comes with a monthly premium, which varies according to factors like the patient’s income.
When a senior is eligible for both Social Security and Medicare, the premium for Medicare Part B will automatically be taken out of their Social Security check. However, receiving Social Security benefits is not a prerequisite for Medicare eligibility.
Part B expenses are paid out of pocket if you haven’t enrolled in Medicare yet. Furthermore, you may find yourself in a monetary bind if you opt to enroll in Medicare and Social Security simultaneously out of sheer laziness.
Your Social Security benefits may be reduced by up to 13.34% if you file for them at age 65 (the complete reduction applies if your FRA is 67). If you receive $2,000 per month from Social Security at age 67, filing at age 65 would result in a payment of $1,733.
The initial financial blow is manageable if you have a sizable emergency fund. But you spend your savings down faster than planned, and you might appreciate the extra $3,200 per year in retirement income.
If you delay claiming Social Security until you’re 65, you’ll see a decrease in your payments, but it will be less than if you waited until you were 62. However, if you’re not rushing to receive Social Security benefits at age 65, there may be better choices than waiting until Full Retirement Age (FRA) to enroll.
When one’s working life is over, and financial stability is a top priority, it’s one thing to file for Social Security benefits at age 65. Waiting a little longer could pay off if that’s not the case.
Consider the stock market’s performance over the past year if you need convincing. A prolonged downturn can devastate a retirement fund, even if only a tiny portion of it is invested in the stock market. As a result, securing a considerable amount of future Social Security benefits can help retirees feel more secure about their financial futures.