Many of us have been contributing to Social Security since our very first job and look forward to the day that we can start seeing a benefit from that investment. It is not surprising that 32% of Americans file for Social Security as soon as they can at age 62. However, this can be a big mistake that can have long term consequences on your retirement plan.
Here Are Some Compelling Reasons To Consider Waiting
1. If you file for benefits before your Full Retirement Age, your benefit will be reduced. This reduction is between 25-30% and is permanent. Also, if you are married, the lower Social Security payment will go away when one spouse passes away. If the spouse with the greater Social Security wage history waits for as long as possible to file, that larger benefit will be left for the surviving spouse.
2. Your benefit will actually increase around 8% per year between your Full Retirement and age 70. After reaching age 70, there is no additional benefit to waiting to take your benefits.
3. If you are still earning money from a job, it is likely that this income will put you over the limit to avoid taxes on the Social Security Benefits. You could end up paying taxes on up to 85% of your Social Security benefit. If possible, it would be beneficial to wait on taking Social Security until you retire.
4. Americans are living longer. According to the Center for Disease Control, the average American who makes it to age 65 can expect to live another 19 years. If you expect to live longer than average, then you will likely get more money from Social Security in your lifetime by waiting to file. For most people, the “break-even” age where waiting until 70 results in more income over your lifetime is just ten years, to age 80.
Please reach out to us before making your Social Security decision. We would be happy to talk through your specific situation and use our Social Security Analysis tools to help you come to the right decision for you.