For more than 80 years, Social Security has been providing a financial foundation for retired workers. Data from the Social Security Administration show that 62% of all current retirees rely on the program for at least half of their income, with 34 on Social Security for nearly all (90% or more) of their income. % Is tilt.
What’s more, an analysis of the Center on Budget and Policy Priorities found that the elderly poverty rate would be over 40% if Social Security was not present. This compares to an elderly poverty rate with social security of less than 9%.
Most retired employees take their Social Security benefits early
Suffice it to say, Social Security plays an important role in helping seniors meet. This means that a worker’s claiming age (ie, when they start taking their Social Security retirement benefits) can significantly affect what they will receive each month and in their lifetime.
The big question for retirees is when should they take advantage.
The simple answer is that there is no simple answer. Since we thankfully do not know our own expiration date, we can never know with certainty that we have made an optimal claim option. Optimally, I am referring to the option that increases the maximum amount you can receive from Social Security over your lifetime.
However, the data is very clear that most of the currently retired workers prefer to claim Social Security – that is, before their full retirement age, which is 65 years and 11 months of age for most current retirees. The medium will be anywhere up to the age of 62 years.
But does claiming social security make a smart move quicker? Let’s find out about the three major professionals and filing for benefits before their full retirement age.
Three benefits of early filing for social security
1. You will be healthy or young to enjoy your extra income
Perhaps the most obvious positive of taking your Social Security benefits early is your ability to enjoy extra income while you are still relatively young and healthy. Although waiting for you to take advantage may increase your monthly payment by up to 8% per year, ending at age 62 and at age 70, there is no guarantee that your health will enjoy your extra income Will last long enough to take. Claiming benefits early allows you to generate additional income for holidays or fund hobbies.
2. This will allow your current investment time to increase
Another potential benefit of taking your Social Security benefits early is that it can give your nest egg time to grow. According to National Pollster Gallup, 55% of Americans with the most crowds of 50% to 64% stock ownership (66%) among all age groups surveyed have stock. If these investors are confident enough that they can get an 8% annual return by withholding their Social Security payments for one year, then an initial claim may be worthwhile. Interesting, broad-based S&P 500 The average annual return is 13.6% over the last 10 years, which includes dividends.
3. You will reduce social security income purchasing power loss
The third and final benefit of the initial claim is the ability to reduce the loss of purchasing power associated with Social Security income. According to a report by The Senior Citizens League, the purchasing power of Social Security income has declined by 30% since 2000. This is because the program’s inflation list, urban wage earning and consumer price index for clerical workers does a poor job of tracking the real costs seniors are facing. Generally speaking, the longer seniors wait to take their payments, the more they become relative to this Social Security income erosion, inflation. An initial claim would reduce some decline in purchasing power.
Three disadvantages to taking social security early
Of course, every social security decision has two sides. Here is an idea to get your retirement benefit soon.
1. Your payment can be reduced by up to 30% permanently
The most obvious disadvantage of taking your Social Security benefits before reaching full retirement age is that you will accept a permanent reduction in your monthly payments. Depending on the year of your birth, taking your payment as soon as possible (age 62) can decrease anywhere from 25% to 30% of what you received, waiting until your full retirement age. Was (often age 66, 67,) or somewhere in between). If you live in your 80s, this initial claim decision often means leaving a substantial amount of lifetime benefits on the table.
2. SSA can block some or all of your benefits
Another problem with taking Social Security benefits before reaching full retirement age is that you will be made aware of the retirement income test. If you earn too much then this “test” withholds some or all of your benefits to the Social Security Administration (SSA).
For example, if you have made your payment early and you will not meet your full retirement age in 2020, SSA withholds $ 1 for every $ 2 in earned income over $ 18,240 ($ 1,520 per month). Can. It does not have much income before kicking in, meaning that double-dipping dreams with work income and social security may be shattered for some early filmmakers.
For those who will meet their full retirement age in 2020, but have not yet done so, the SSA can withhold $ 1 for every $ 3 in earned income over $ 48,600 ($ 4,050 a month).
3. You can sabotage your loved ones financially
Finally, an initial claim may adversely affect the earning capacity of a living spouse. This can be especially important if the household income breadwinner is the one who passes first. At SSA bases a deceased worker has the remaining benefits to be purified each month. If that worker opted to file for benefits quickly, the payment to the surviving spouse would be reduced. In other words, it can pay to wait if it means ensuring the financial livelihood of your loved ones.
Are the initial steps claiming to be smart? You have to decide.