Can’t Wait Until 70 To Claim Social Security? Here’s How To Maximize Your Retirement Income
Written by
Sean Bryant
Edited by
T. Woods
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Waiting until you’re 70 is key to maximizing your Social Security benefits. Unfortunately, that’s not always possible for everyone — sometimes circumstances force you to claim your benefits earlier. When that’s the case, it’s important to consider all your options and find ways to maximize your retirement and Social Security benefits.
You can start claiming Social Security as soon as you reach 62. However, the full retirement age for collecting 100% of your Social Security benefits is 67. If you delay claiming benefits, you can earn an extra 8% yearly until age 70. Unfortunately, the current system isn’t going to last. The Social Security Board of Trustees estimates there will be enough money in the Social Security trust fund through 2034. At that point, benefits must be reduced to 80% of the current amounts.
Lawmakers have been throwing around ideas to fix the problem for years. Recently, Republican presidential candidates have used the debate stage to promote raising the full retirement age from 67 years.
While you might think you need your Social Security early, there are things you can do to delay claiming benefits and maximize your monthly amount. There are also things the Social Security Administration can do to help workers bridge the gap between when they can collect benefits and when it would be most beneficial.
Use Your 401(k) or Individual Retirement Account
One increasingly popular option for those who are near retirement is bridging the gap until you turn 70 by tapping into a 401(k) or individual retirement account. The problem is that according to the 2020 census, less than half of working-age adults have any retirement account. While the number of baby boomers with a retirement account is slightly higher, it’s still only 58%.
If you’re one of those who’ve been able to save a significant amount of money for retirement, using that savings until you turn 70 could mean an additional $1,000 in monthly Social Security benefits.
Use Bridge Annuities
Annuities tend to be a financial product that many people don’t know anything about. And if they have heard of them, they don’t really know how they work. They’re also not the best option for everyone, especially those without much of a savings cushion.
Annuities will provide a guaranteed income for a pre-determined period, but they require a large upfront investment to get started. Currently, some 401(k) plans include the option to add annuities, but it’s a very small percentage of 401(k) providers. With a bridge annuity, you could postpone collecting social security from 62 to 70 and then have annuity payments covering the delayed benefit amount.
Take Advantage of the Special Minimum Benefit
Social Security provides a special minimum benefit if you’ve been a low-income worker for an extended period. Unlike standard Social Security, which is tied to a worker’s wages, the Special Minimum Benefit factors in prices. Since the Special Minimum Benefit was enacted in the early 1970s, the number of qualified people has decreased because wage growth has outpaced price increases. However, if you qualify, you can take advantage of this if you don’t have the option to wait beyond age 62 before claiming Social Security benefits.
Employer-Sponsored Bridge Options
A recent report by the Schwartz Center for Economic Policy Analysis talks about how a bridge option through employer-sponsored plans could be another suitable option for someone planning to retire before full retirement age but wants to maximize their Social Security benefits.
With an employer-sponsored bridge option, a certain amount of funds in the 401(k) account would be allocated to the bridge. Once you hit retirement, you’ll start receiving bridge payments in the amount of your Social Security benefits if you chose to claim them at 62. These payments will continue until you reach 70 or the bridge funds are depleted.
The Bottom Line
While waiting until 70 to start claiming your Social Security benefits is not always possible, doing so will allow you to collect the largest possible check. If you’re considering collecting your benefits early, consider one of these options instead.
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