Millions of American workers ask themselves each year whether they should start collecting Social Security retirement benefits or wait a bit longer.
Many experts suggest waiting until age 70 to start claiming Social Security benefits if you want a bigger monthly payment. The main reason is that delaying until then can help you get the most out of your retirement benefits.
Additionally, waiting can offer some tax advantages for higher-income households. However, there are also drawbacks to waiting until you’re in your 70s to start collecting Social Security. Understanding these potential issues can help you make a more informed decision about when to file for benefits.
Things to Consider When Filing for Social Security at Age 70
Deciding when to start Social Security can be tricky, especially if you’re thinking about waiting until age 70. While waiting can lead to higher benefits for many people in good health, there are a few important things to keep in mind:
- Health: If you’re in great health, waiting until 70 could mean more money over your lifetime.
- Spousal Benefits: Depending on your situation, filing earlier might actually provide more benefits for you and your spouse.
- Taxes: For those with higher incomes, delaying Social Security could offer some tax advantages.
Choosing when to start Social Security is a personal decision. It’s important to weigh your health, financial needs, and retirement plans before deciding. What’s right for one person might not be the best choice for another.
Also, don’t forget to consider your spouse and your overall household income. This includes understanding how spousal and survivor benefits can impact your retirement planning.
Maximizing Social Security Spousal Benefits
Spousal benefits can be quite valuable, potentially providing up to half of what your spouse would get at their full retirement age. These benefits reach their maximum when you hit your own full retirement age. So, it might make sense to start claiming benefits earlier to get the most from your spouse’s benefits, even if it means filing before you turn 70.
Understanding Survivor Benefits
Survivor benefits help ensure that the surviving spouse receives the higher amount that the deceased spouse was entitled to. Because of this, it may be smart for the lower-earning spouse to start claiming benefits as early as age 62.
If the lower-earning spouse starts claiming at 62 while the higher-earning spouse waits until age 70, the total benefits they receive over their lifetimes might be higher, depending on how long the higher-earning spouse lives.
- Spousal Benefits: You can get up to half of your spouse’s full retirement amount.
- Survivor Benefits: These make sure the surviving spouse gets the higher amount that the deceased spouse would have received.
- Timing: When you start claiming benefits can change the total amount you receive.
By thinking carefully about these factors, you can create a retirement plan that maximizes benefits for both you and your spouse. Understanding how spousal and survivor benefits work can greatly impact your financial health in retirement.
Claiming Social Security benefits can get tricky when both spouses are involved. What might seem simple for one person can become more complex with two.
Considering Your Heirs
Waiting until you’re 70 to start claiming Social Security benefits might give you a higher monthly amount, but keep in mind that these benefits can’t be passed on to your heirs. Instead, in your 60s, you’ll need to rely more on your retirement savings to cover your costs. This might mean tapping into your investments earlier, which could leave less for your loved ones when you’re gone.
The Aggressive Investor’s Strategy
Some investors who are comfortable taking risks might choose to start collecting Social Security benefits sooner. Their goal is to make their investments grow faster than their Social Security checks would increase. By using the money from Social Security, they can reduce the amount they need to withdraw from their investment accounts.
If the market performs as it usually does, this approach could leave you with more money in your investments compared to waiting to start your Social Security benefits later.
Deciding when to claim Social Security is a personal choice. It depends on your financial situation, health, and retirement plans. Weighing these factors carefully will help you make the best decision for you and your family’s future.
However, there are risks with this strategy. The stock market can be unpredictable, and a series of bad returns could leave you with less money to pass on to your heirs. On the other hand, delaying your Social Security benefits gives you a more reliable return compared to other low-risk investments.
Covering Medicare Premiums
When you retire and sign up for Medicare, you usually don’t need to worry much about paying for Medicare Part B premiums. That’s because the Social Security Administration automatically takes these payments out of your monthly check. However, if you choose to sign up for Medicare but hold off on claiming your Social Security benefits, you’ll need to cover these premiums on your own.
You’re Still Paying for Medicare
No matter which route you take, you’re still paying for Medicare. The only difference is whether you’re drawing from your personal savings or receiving a smaller Social Security check each month.
Key Takeaways:
- Stock Market Risks: The stock market can be unpredictable and might impact what you leave to your heirs.
- Social Security Benefits: Waiting to claim Social Security benefits can give you a more reliable and beneficial return.
- Medicare Premiums: If you delay your Social Security, you’ll need to pay Medicare premiums out of pocket.
In the end, you’re paying for Medicare either from your savings or through a reduced Social Security check. Understanding these points can help you make better financial decisions.