While it’s not advisable to rely solely on Social Security during your golden years, it’s undeniable that these benefits play a significant role in many retirees’ financial plans. For the average working American, Social Security benefits will only replace approximately 40% of their pre-retirement income. Given that many seniors require nearly double this amount to manage their expenses comfortably, maximizing these benefits is crucial.
The Untapped Potential of Delayed Filing
Social Security promises a lifetime monthly benefit once you decide to file. Therefore, ensuring you receive the highest possible amount is in your best interest. Shockingly, most Americans must pay more attention to a simple strategy to enhance their monthly benefits.
Like annuities offering guaranteed income, Social Security provides a similar assurance. One of the most straightforward methods to increase your monthly benefits is to postpone your Social Security filing beyond your Full Retirement Age (FRA).
Depending on what year you were born, your FRA could be 66, 67, or somewhere in between. This age represents the point at which you can receive your full Social Security benefit based on your earnings record. By delaying your claim until age 70, you can enjoy an 8% annual increase in your gifts, and this boost is permanent.
Yet, a recent study by Schroders, a renowned asset management company, highlighted a concerning trend. Only 10% of workers wait until age 70 to file for Social Security, even though a significant portion would financially benefit from such a decision.
Weighing the Pros and Cons of Delayed Filing
Delaying Social Security benefits until you turn 70 might only be suitable for some. For some, it might necessitate working full-time until that age. Those with significant health concerns also risk receiving a smaller total payout from the program over their lifetime if they delay.
Moreover, you’ve managed to amass a substantial retirement fund. In that case, the monthly amount you receive from Social Security might not be a primary concern. You may prefer to start your benefits earlier to fund your travel dreams or other aspirations.
However, it’s worth contemplating a delayed Social Security claim until age 70 for those in good health approaching retirement without a hefty savings cushion. Retirement often comes with unforeseen expenses; the additional guaranteed income can provide a safety net. Plus, with a higher monthly benefit, retirees have more financial flexibility, allowing them to make the most of their free time.
The Value of Informed Decisions
Retirement planning is a multifaceted process, and decisions regarding Social Security are no exception. While it’s essential to consider individual circumstances, it’s equally crucial to be aware of the potential benefits of delayed filing. By making informed choices, retirees can ensure a more comfortable and fulfilling retirement.