Factors to Consider When Deciding to Delay Social Security Benefits

Full Retirement Age (FRA)

Your Full Retirement Age (FRA) is the age at which you’re entitled to receive 100% of your Social Security benefits. For most people, FRA is between 66 and 67, depending on your birth year. If you start taking benefits before your FRA, they will be reduced. However, if you wait until after your FRA, your monthly benefit amount will increase.

Benefits Increase with Delay

If you choose to delay Social Security benefits past your FRA, your monthly payment will increase by approximately 8% per year until you reach age 70. This could mean a substantial increase in your monthly payments if you live well into your 80s or beyond.

Life Expectancy

One of the key factors to consider when deciding whether to delay your benefits is your life expectancy. If you have a family history of longevity or if you are in good health, delaying benefits can be a good strategy to maximize the total amount of Social Security you’ll receive over your lifetime. However, if your health is poor or you anticipate a shorter life expectancy, starting benefits earlier may make more sense.

Need for Immediate Income

If you need immediate income and don’t have significant savings or other retirement income, you may decide to begin taking Social Security benefits as soon as you’re eligible. Waiting until a later age could be difficult if you rely on Social Security as your primary source of income.

Impact on Spousal Benefits

If you’re married, delaying your benefits can also affect your spouse’s Social Security benefits. If you wait to claim your benefits, your spouse may also receive a higher benefit based on your increased payment. It’s important to factor in how delaying could impact your family’s overall financial situation.

Social Security Taxes

If you’re still working when you start receiving Social Security, your benefits may be subject to Social Security taxes. This could impact the amount you ultimately receive, so you’ll need to consider your current employment situation before making a decision.

Personal Preferences and Goals

Your personal preferences and retirement goals also play a crucial role in deciding when to claim benefits. If you’re financially independent and can afford to wait, it may be worth delaying to secure higher monthly payments. On the other hand, if you want to enjoy the extra income earlier, starting benefits early could be the right choice.

Pros and Cons of Delaying Social Security Benefits

Pros:

• Increased monthly benefit: The longer you wait, the higher your benefit will be.
• Higher lifetime payout: If you live longer, delaying benefits can provide a significantly higher payout over time.
• Spousal benefit increase: Delaying can also result in a higher spousal benefit for your partner.

Cons:

• Delayed access to funds: You’ll need to wait longer before receiving any benefits.
• Risk of death before break-even point: If you pass away earlier than expected, you may not recoup the delayed benefits.
• Missed opportunities for immediate financial support: If you need the money now, waiting may not be the best option.