5 Types of People Who Could Actually Benefit from Delaying Social Security
Written by
Joel Lim
Edited by
Zuri Anderson
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You may have figured out when you’re eligible to collect your Social Security benefits, but you might not have considered whether you should.
You see, that check doesn’t automatically come in the mail when you turn 62. Though you can start receiving early benefits at that age, unless you have to, you probably shouldn’t. Taking early retirement means your checks will be significantly lower than they would be if you waited.
And even though full retirement for most people begins at age 67, many people could actually benefit from delaying even further. Why? More money, of course. The longer you delay receiving your Social Security benefits, the bigger your monthly payout will be.
It is important to note that there is no benefit to delaying past the age of 70. But who should wait that long? Find out below.
1. People in Excellent Health
The idea here is that if you’re healthy enough to expect to live a long life, potentially longer than the average lifespan in the United States, then you can wait, according to the Centers for Disease Control and Prevention (CDC). Why? This means you’re in good health and can continue your career.
Even if you dropped down to part-time at work, or stayed on in a consultant or advisory position only, you can keep bringing in cash. This means you can continue to contribute to your IRA or 401(k) plan. And, of course, it means you can wait to collect your Social Security.
That way, let’s say you retire when you’re 70 and completely stop working altogether. Now you can collect the maximum from Social Security, plus your IRA withdrawals, and any other retirement money you’ve got stashed. You could potentially live another 20 years or more in good health, enjoying your retirement with relative ease.
2. People with Plenty of Income
This same argument applies to those who make really good money. In this case, even if you’re not in exceptional health, you may be able to rely on your income or your retirement fund to support you until you have to collect Social Security.
You may still want to retire early, but that doesn’t mean you have to collect your Social Security check.
Essentially, you could use your IRA or 401(k) payouts to fund your early retirement, and then when you hit 70, you can just add your Social Security to the pile, like the icing on the top.
If you’re in excellent health and making great money, then you’d definitely benefit from delaying. You’ve got the best of both worlds.
3. Higher-Earning Spouses
If you’re in a marriage where one spouse makes significantly more money than the other, delaying Social Security is a good idea, as it will benefit you both. Particularly if the lower-earning spouse made little to no income over their lifespan, delaying could be lifesaving.
Why? First, the higher-earning spouse will get a larger check by delaying until they reach the age of 70.
Second, if the higher-earning spouse dies before the lower-earning spouse, the lower-earning spouse will get to collect that higher Social Security check. This is called Survivor’s benefits. In essence, it’s a way for the higher-earning spouse to make sure their loved one will be cared for after they’re gone.
4. People Who Want To Cut Taxes
A lot of people don’t realize that just because you’re retired and raking in the big bucks in retirement checks doesn’t mean the government won’t still get its cut.
That’s right, your IRA, 401(k) accounts and Social Security checks will all be taxed. And if you’re not careful, you can end up paying a lot in taxes.
After all, if you’re taking multiple retirement payouts, your income may get boosted into a higher tax bracket. In our graduated income tax system, that means you’ll pay more in taxes.
You can avoid this inevitability, at least for a while, by delaying your SS check until you’re 70. Then, you’ll only have to pay taxes on the income from your other retirement payouts, including your pensions and annuities, per the IRS.
5. People Who Can Tolerate More Risk
Many people who enjoy investing in the stock market expect to grow their wealth year over year by making smart investments. Typically, delaying Social Security will earn you, on average, an additional 8% per year. That’s a good investment.
If you delay, that’s pretty much a sure thing. And if you like to play in the stock market, you can continue to invest your disposable income into funds that come with higher returns, but higher risk.
Basically, you’re betting that you can make even more money year over year than your returns on Social Security. It’s a risk, but one that might pay off heavily, according to the Retirement Income Institute.
After all, the stock market pays out, on average, a 12% return annually, per Ramsey Solutions. And, in the end, even if you lose, you’ll still get that sure thing of a Social Security check when you turn 70. It’s kind of like your backup insurance.
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