Are you planning to delay social security? You need a backup plan | Smart Change: Personal Finance

(Maurie Backman)

While planning for retirement, one of the most crucial decisions you may face is when to sign up for Social Security. If you are claiming benefits at full retirement age (OFF), which start at 66, 67 or somewhere in between, depending on your year of birth, you will not face a reduction or a boost. Instead, you get the exact monthly benefit that your earnings history entitles you to.

That said, you can sign up for Social Security up to five years before FRA, starting at age 62. For every month you claim benefits prior to FRA, your benefits are reduced, but you get your money faster.

On the other hand, for every month you delay Social Security past OFF, your benefits get a boost. In fact, you can endure signing up for up to 70 years and increase your benefits at the same time. And if you wait that long, you end up with a 24% to 32% boost for life, depending on your specific OFF.

Image Source: Getty Images.

Clearly, there is a lot to be gained financially by delaying your claim to social security. But if this is the route you decide to take, you should also have a backup plan.

Why require social security later, may not work

Your work status may not affect your social security application if you retire with a large nest egg. But many seniors need to keep working to make it possible to delay social security.

If this is the boat you’re in, you can try to put up with passing FROM – but you can not assume that plan will work. This is because older employees routinely end up having to leave the workforce earlier than planned, whether it is due to health issues, layoffs or other conditions beyond their control. And so if you are betting on a larger social security benefit to fund your pension, you may want to have a backup plan in place.

Now that backup plan can mean you work part-time in retirement if the need arises. It can also mean cutting back on a smaller home or renting out part of a larger one that you decide to hang on to.

But no matter what, it’s important to know what steps you will take to compensate financially if you are unable to delay your social security claim, even if you have every intention of doing so. That way, you will not be left to struggle throughout your retirement.

Your health should also be a factor

While a delay in social security may mean that you get a lot more money from the program on a monthly basis, it does not necessarily mean that you get more in one lifetime basis. To achieve the latter, you generally need to live a longer life. And if your health is not good when you retire, it may not happen.

As such, before committing to delaying social security, you need to consider whether it is feasible and also whether it actually makes sense from an economic point of view. You may decide that it is actually a better way to go, to claim benefits at a younger age.

The $ 18,984 social security bonus completely overlooks most retirees

If you are like most Americans, you are a few years (or more) behind with your retirement savings. But a handful of little-known “social security secrets” could help secure a boost in your retirement income. For example: one easy trick could pay you as much as $ 18,984 more … every year! Once you’ve learned how to maximize your social security benefits, we think you can safely retire with the peace of mind we all seek. Just click here to find out how you can learn more about these strategies.

The Motley Fool has a disclosure policy.

Leave a Comment

Your email address will not be published.