When Should I begin Taking Social Security?
7 Reasons Why Delaying Social Security May Make Sense
If you are nearing retirement, deciding when to claim social security benefits may be one of your most important decisions. While many people choose to claim their benefits as soon as they become eligible, there are many compelling reasons to consider delaying your claim. Here are seven key reasons why claiming Social Security late may be a wise decision for your financial future.
1. Will Delaying Social Security Increase My Monthly Benefit?
One of the most significant advantages of delaying your Social Security claim is the potential to increase your monthly benefit amount. You can earn delayed retirement credits by waiting past your full retirement age (FRA), typically between 66 and 67 years old. Each year you delay claiming, your benefit grows by about 8% until age 70, substantially increasing your monthly income during retirement.
2. Will Delaying Social Security Increase My Survivor and Spousal Benefits?
Delaying your Social Security claim can also positively impact your spouse or surviving spouse. When you wait to claim, you increase the survivor benefit available to your spouse if you pass away first. Additionally, if you are married and your spouse is eligible for spousal benefits, delaying your claim can result in higher benefits for both of you.
3. Can Delaying Social Security Reduce My Income Taxes?
Delaying your Social Security claim may reduce your income tax burden. If you continue working and earning a substantial income, claiming Social Security may result in a higher percentage of your benefits being subject to taxation. Taking your Social Security, when you are no longer earning employment income, can help minimize the taxes you will owe.
4. How Does Delaying Social Security Help Me Save More For Retirement?
Delaying your Social Security claim gives you more time to grow your retirement savings and take advantage of investment opportunities. By working longer, you will have additional years to contribute to your investment portfolio and retirement accounts, helping you accumulate a more significant nest egg. This increased savings potential can provide greater financial security and flexibility in your retirement.
5. How Does Delaying Social Security Increase My Cost-of-Living Adjustments (COLAs)
If you delay claiming Social Security, your cost-of-living adjustments (COLAs) will be worth more. COLAs are the annual increase in benefit payments to offset the impact of inflation. By waiting to claim, the yearly COLAs will be based upon the higher monthly Social Security benefit, making your annual adjustment larger from a dollar value perspective. These more significant annual COLA amounts will ensure your benefits keep pace with rising living costs.
6. How Does Delaying Social Security Create Flexibility In Retirement?
By delaying your Social Security claim, you gain greater flexibility in your retirement planning. You have the freedom to adjust your retirement age based on your financial situation, lifestyle preferences, and other factors that may impact your retirement goals. You can also elect to claim Social Security at any time. This flexibility allows you to make more informed decisions and align your Social Security benefits with your retirement strategy.
7. How Does Delaying Social Security Provide Peace Of Mind?
Lastly, claiming Social Security late can provide peace of mind. By delaying your claim, you give yourself more time to assess your financial situation, explore different retirement options, and make informed decisions about your future. You will also never have that nagging question about whether or not you decided to claim too early. This sense of security can alleviate stress and allow you to enjoy your retirement with confidence and tranquility.
What Is Your Social Security Strategy?
While there is no one-size-fits-all approach to claiming Social Security benefits, delaying your claim offers numerous advantages. From increasing your monthly benefit to providing extended financial security and flexibility in retirement planning, there are compelling reasons to consider claiming Social Security late.
(Looking for an article on reasons to claim Social Security early? Please read my article here.)
Take the time to review your options, consult with a fee-only, fiduciary financial advisor if needed, and make an informed decision that aligns with your long-term financial goals.
About the author:
JP Geisbauer is a Certified Public Accountant, a Certified Financial Planner ®, and the founder of Centerpoint Financial Management, LLC, a financial planning, investment management, and income tax planning firm located in Irvine, CA. JP Geisbauer is dedicated to helping California-based business owners and executives transition into retirement. He has been quoted in many news outlets including Forbes, Newsweek, US News & World Report, MarketWatch, YahooFinance, CNN and NerdWallet.
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Disclaimer:
This article is for general information and educational purposes only. Nothing contained in this article constitutes individual financial, investment, tax, or legal advice. Before taking any action on any topic discussed in this article, consult with your own financial planner, investment advisor, tax professional, and/or attorney for advice on your specific situation.