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What to Know About Delaying Social Security

What to Know About Delaying Social Security

As soon as you reach your “full” retirement age, probably when you’re around 66 or 67 years old, you can start collecting your full benefits. However, you also have the option not to collect your benefits yet. You have the right to collect them as early as age 62 and as late as age 70.

What this means is that you can decide when exactly you’re going to collect that vital income. Although there are great reasons to collect as early as possible, delaying your social security can also be the best decision to make.

1. Delay For Work Reasons

If you’re still working, it may be a good idea to delay taking Social Security benefits. Although it’s noticeable that the most common age at which people retire is 63 and those who start collecting their Social Security is 62. A lot of people don’t get to choose when to retire because they sometimes fall ill, get downsized out of a job, or are forced to take care of a loved one.

However, if you’re one of those who are still working regardless of the reason, it’s important for you to know that any Social Security benefit payments you get may be taxed. It happens when your income over a year features not only Social Security benefits but also large sums from one or other sources like wages and self-employment income, interest, dividend income, and others. You could be taxed on up to 50% or 85% of them but not on more than 85% of your Social Security benefits. It's highly possible for you not to be taxed only Social Security benefits equates to all or the large majority of your income.

If you want to find out whether you’ll to have to pay taxes on Social Security benefits, just calculate your “combined” income. Your combined income is your Adjusted Gross Income (AGI) and non-taxable interest as well as half of your social security benefits.

The positive thing about working a few more years before you retire or working in retirement is that you generate extra income. When you postpone your retirement entirely, you get to improve your financial status in the future because your retirement nest will also keep on growing since you’re not taking anything from it. Not only that, but you can also enjoy employer-sponsored health insurance.

2. Delay for Bigger Checks

Did you know that you can actually make your ultimate checks bigger when you delay taking in your Social Security benefits? Your benefits grow by about 8% for every year beyond your full retirement age that you delay collecting your Social Security. Now can you imagine if you delay from age 67 to 70? Your checks will be about 24% bigger. If we use this in numbers, let’s say your full benefits is $2, 000 per month, it would grow to $2, 480 over a year, that’s a huge difference of $5, 760. This strategy doesn’t always work in every situation though.

Social Security Administration explains that those who live to the average life expectancy for someone their age, they will receive just about the same amount in lifetime benefits regardless of whether they choose to start accepting benefits at age 62, full retirement age, age 70 or any age in between. The reason being is that even though a check that was received early is smaller, there are still a lot of them. This means those who live average lifespans is kind of a wash and it makes more sense to collect at 62 or soon after.

Now if you believe you have a chance to live an extra-long life, you can get more out of the program if you delay and receive larger checks.

3. Delay to Strategize

It may be best if you and your spouse delay your Social Security collection and strategize. If you’re married, you get more options when collecting Social Security benefits compared to single individuals. This means that you have to coordinate with your spouse and create a strategy especially if there’s a great disparity in the earnings history of the two of your or there’s a huge difference in your age. A perfect example is when one spouse dies, the surviving spouse can collect the higher of the two benefit amounts. This is why it’s ideal for at least one spouse to delay collecting benefits for a bigger eventual check.





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