The majority of financial advisors and retirement specialists suggest delaying claiming until reaching the age of 70. Social Security is a government program that provides financial assistance to eligible individuals, such as retirees or people with disabilities. The main rationale behind this general guideline is that most people can increase their overall benefits over their lifetime by choosing to postpone receiving Social Security payments. In addition, there are also some tax advantages for wealthier families when following this strategy.
However, there are still disadvantages to delaying Social Security benefits until after turning 60. These downsides highlight the challenges that typical American retirees may encounter when making their decision about when to claim their benefits.
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Filing for benefits earlier may allow you and your spouse to potentially receive higher lifetime benefits.
There is a possibility that you may not live long enough to fully benefit from choosing to postpone receiving Social Security until age 70. Nevertheless, those in good health or better than average health are likely to receive greater benefits from Social Security if they wait until they reach the age of 70.
There could be alterations in the situation when you take into account a partner and the combined income of your household. This is important to think about. benefits for a spouse and benefits for surviving spouses. Spousal benefits have the potential to amount to fifty percent of the benefits that your spouse is entitled to receive. The age at which a person is eligible to receive full retirement benefits. The benefits reach their maximum amount when you reach your full retirement age. Therefore, it may be more advantageous to apply for benefits early in order to maximize your spousal benefits before turning 70.
When thinking about survivor benefits, it may be advantageous for you to apply for them starting at the age of 62. These benefits are designed to guarantee that a surviving spouse who earned less can receive a higher amount equivalent to what the deceased spouse was getting. For instance, if the spouse with lower earnings applies for benefits at 62 while the higher-earning spouse delays until they reach 70, they could potentially receive a greater total benefit amount throughout their lifetimes together, depending on the circumstances of the higher-earning spouse’s passing.
Although claiming strategies are usually straightforward for individuals, they become significantly more complicated when a spouse is involved.
You may end up leaving a smaller inheritance for your descendants.
Delaying claiming Social Security benefits until the age of 70 can lead to a higher monthly payout, but it’s important to note that this increased amount cannot be inherited by your descendants. Consequently, during your 60s, you may need to rely more on your retirement savings, which can be passed down to your heirs, in order to cover your expenses. However, tapping into your investment portfolio prematurely may reduce the amount of money available to leave to your beneficiaries in the future.
Certain bold investors may opt to start receiving benefits sooner with the expectation of outpacing the increase in their Social Security payments through investing. By receiving a monthly check, you reduce the need to withdraw funds from your investment portfolio. If the market performs as expected, you could potentially have a larger sum in your investment accounts by starting early rather than waiting to maximize your Social Security benefits later.
Those thinking about adopting this plan should be aware of the potential drawbacks. The stock market does not consistently rise without fluctuations. If you experience a series of negative returns, it may reduce the amount you can pass on to your beneficiaries. Conversely, delaying your Social Security benefits offers a dependable and comparatively higher return when weighed against other safe investment options.
You will be responsible for covering the costs of Medicare premiums.
The majority of individuals who retire and join Medicare There is no need to worry about Medicare Part B premiums as the Social Security Administration will deduct the amount you owe directly from your monthly check when you sign up. However, if you choose to delay your Social Security benefits and enroll in Medicare separately, you will be responsible for paying the premiums yourself.
Keep in mind that you are still responsible for Medicare expenses regardless. The difference lies in whether you pay directly from your bank account or opt for a reduced Social Security payment each month.
In 2024, the majority of individuals will be charged $174.70 monthly for Medicare Part B premiums, although the amount can increase to $594 per month based on your earnings. If you are postponing your Social Security benefits until you reach 70 years old, it is important to consider these premiums when planning your budget.
