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Many people struggle as they enter their early 60s with the key financial decision of when to begin receiving Social Security benefits.
While around one in three Americans opt to start receiving Social Security at age 62, it’s worth considering the advantages of waiting until age 67.
This decision can significantly impact your retirement income and financial well-being. Here are three compelling reasons why delaying your Social Security benefits until age 67 may be the wisest choice.
One of the most compelling arguments for waiting until age 67 to claim Social Security benefits is the potential to earn more money through continued employment.
The average monthly Social Security retirement benefit of $1,837 often falls significantly short of the average monthly income of $4,621.
Opting to claim benefits before age 67 while continuing to work could result in reduced benefits due to the Social Security Administration’s earnings limits.
For every $2 you earn above the annual limit (set at $21,240 in 2023), the SSA deducts $1 from your benefits.
However, waiting until your full retirement age allows you to avoid these deductions, ultimately leading to a more favorable financial outcome.
Delaying your Social Security benefits until age 67 also leads to higher monthly benefits.
The SSA reduces your benefits if you claim them before your full retirement age, with the reduction calculated at five-ninths of 1% per month for up to 36 months before reaching full retirement age.
If you claim benefits even earlier, the reduction is five-twelfths of 1% per month.
To illustrate, if your full retirement age is 67 and you choose to retire at 62, your monthly Social Security benefit could be reduced by as much as 30%.
Waiting until age 67 helps you avoid these reductions, resulting in a more substantial monthly benefit.
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Delaying Social Security
A less obvious yet significant advantage of waiting until age 67 to begin receiving Social Security benefits is the extra time it provides for retirement savings.
Social Security typically covers only around 40% of pre-retirement income, underscoring the importance of supplementing your income through other sources.
Delaying your retirement until age 67 enables you to contribute more to retirement accounts like 401(k)s and IRAs, allowing your investments more time to grow.
Seeking guidance from a financial advisor as you near retirement can help you make informed investment decisions and maximize your retirement funds.
For those aiming to optimize their Social Security benefits, an even more advantageous option is to delay retirement until age 70.
By doing so, you can increase your monthly benefit by a substantial 24%.
However, it’s essential to note that this approach carries some risk – if you don’t live long enough, your cumulative lifetime benefits may be lower than if you had claimed benefits earlier.
In a landscape of complex retirement decisions, the timing of your Social Security claim plays a pivotal role in shaping your financial future.
Weighing the advantages of waiting until age 67 for enhanced earnings, increased benefits, and extended savings opportunities can help you make an informed choice that aligns with your long-term financial goals.
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Source: USA Today.com
