How to delay claiming Social Security until age 70 | social Security
When you turn 62, if you have paid taxes into the Social Security system, you can apply for retirement benefits. However, waiting until you reach your full retirement age, which is usually age 66 or 67, will result in a higher monthly Social Security check. Individuals who defer benefits until age 70 will receive the largest monthly amount possible. After age 70, there are no further increases to delay your benefits.
If you want to wait until age 70 to receive Social Security checks, consider the following guidelines:
- Understand what you will get.
- Spend other accounts.
- Make a financial plan.
- Keep working.
- Lower your cost of living.
- Think of your wife.
Understand what you will get
The year you were born, the salary you earned during your working years and the age you began drawing on Social Security will affect the amount you receive. “For every year you delay in receiving Social Security benefits past your full retirement age, you will receive late retirement credits,” says Brandon Ashton, director of retirement insurance at Cornerstone Financial Services in Southfield, Michigan. “These deferred retirement credits equate to 8% per year in small interest increments.”
Your monthly benefit amount goes up each year until age 70. If your full retirement age is 66, and you wait until you’re 70 before applying for Social Security, you can expect to receive 32% higher paychecks. Your Social Security statement lists an estimate of how much you could expect to receive if benefits began at different ages.
Spending other accounts
You may have retirement accounts that can be tapped, such as a 401(k) or IRA, while you wait for Social Security to start. “Never take more than you need and make sure this strategy will benefit you in the long run, otherwise it will fail the purpose of delaying benefits,” Ashton says.
Look at cash levels and easily accessible savings accounts. “Any retiree should develop a cash reserve of at least 12 months of pre-retirement spending needs,” says David Edmstein, founder and principal advisor to Next Phase financial planning in Prescott, Arizona. “These funds allow an individual to cover all of their expenses without having to withdraw from investments or initiate Social Security benefits.”
Savings and investment accounts are accessible for three to five years when you are late in claiming Social Security. Retirees can “look forward to taking advantage of CD and bond interest, dividend-paying stock dividends, and perhaps even selling valued assets they’ve held for more than a year to generate additional cash for retirement spending,” says Edmstein.
Make a financial plan
When budgeting, you may consider an annual stipend to supplement income for the coming years. “Annuities are contracts issued by insurance companies that can provide a guaranteed lifetime income in return for a lump sum payment,” Ashton says. There are different types of annuities, and you will need enough money up front in many cases. In certain circumstances, you can set up annual payments for the years between your retirement and age 70. “An example would be someone who retires at age 55 and creates a fixed 15-year period of annuity,” says Kevin Lau, financial planner and founder of Imagine Financial Security at Jacksonville, Florida. This income will close the gap until age 70 and Social Security payments begin. These pensions can be funded with retirement or non-retirement dollars.”
If you are healthy, you can continue to work after the age of 65 to maintain your home and lifestyle. “Most people hit their peak earning years shortly before retirement,” Ashton says. “Waiting an extra year or two can not only help you earn overdue retirement credits, but it can also increase your retirement accounts.” Once you’re age 50 or older, you can put an additional $6,500, in addition to the $20,500 annual contribution for 2022, into a 401(k), 403(b), or 457 plan. You’ll also be eligible to contribute an additional $1,000 to the Roth or traditional IRA, above the 2022 threshold of $6,000.
Reduce your cost of living
By reducing your monthly expenses, you can increase your savings and live on less while you wait for Social Security to start at age 70. Downsizing is one strategy to lower housing costs. “You might consider selling your home and buying a less expensive home or moving to a less expensive city for retirement,” says Lau. “This can lead to an infusion of tax-free cash that you can use to bridge income to Social Security.” The exemption from basic residence tax liability is $500,000 for a married couple and $250,000 for a single person. Other ways to reduce include paying off high-interest debt, canceling online subscriptions, and traveling and eating out less.
Looking at your wife
If you and your spouse qualify for Social Security payments, learn about the larger benefit. You can choose to start taking the smaller benefit and delay the larger payment. “You’ll want to defer the greater advantage of these two provisions until age 70,” says Lau. The inheritance allowance entitles the spouse who lives the longest to obtain the two largest pensions. “That way, the surviving spouse will get the greatest possible lifetime benefit,” says Lau.