Delaying Social Security for a higher payment is overrated. This is why. | personal finance

(Stefon Walters)

Social Security is a main source of retirement income for many people, and for some it is the only source. You can start receiving Social Security benefits at age 62, or you can delay your benefits until age 70, which will increase your monthly total. Although delaying your benefits until you reach age 70 may sound like a good thing due to the higher benefits, it may also be overrated. This is why.

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Waiting may not be worth it

The amount of your Social Security benefit in retirement largely depends on your retirement age. Social Security bases this benefit on your full retirement age, which can vary based on your year of birth.

Year of birth full retirement age
1943 to 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

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Data source: Social Security Administration.

If you retire at full retirement age in 2022, the maximum monthly benefit is $3,345; if you retire early at 62, it’s $2,364; if you delay your benefits until age 70, your maximum benefit increases to $4,194. The jump in benefits from waiting until age 70 may seem significant, but it’s a bit misleading. Your checks will be larger, but you will receive much less than you would if you took benefits early or at your full retirement age. If your full retirement age is 67, there are 60 months between 62 and 67 and 96 months between 62 and 70, that’s a lot of lost checks.

Let’s say you were born in 1970 and currently earn $80,000. Using the Social Security benefit calculator, this is the expected monthly payment and the total amount you would have received at certain ages:

Age you start receiving benefits Monthly Benefit Total received by 80 Total received by 85
62 $1,605 $346,680 $442,980
67 $2,410 $375,960 $520,560
70 $3,075 $369,000 $553,500

Data source: Social Security Administration

Using these figures, you can see that at age 80, delaying your benefits until age 70 would have resulted in fewer benefits overall than if you had started at age 70. At age 85, total benefits may be higher, but there is no way of knowing. whether someone will live long enough for the exchange to make sense.

Making the most of your retirement

Another key aspect here is being able to get the most out of your retirement. You have no way of knowing when you will die, so delaying benefits for years can affect your quality of life in your early retirement years. Some new retirees may want to travel and take up new passions and hobbies, and doing so will inevitably cost money.

Rather than delay Social Security benefits until age 70, many will find it more rewarding to receive their benefits early, even at the lower monthly payment, so they can have money to pursue these new ventures and passions. He has worked hard and paid Social Security taxes throughout his career; give yourself the opportunity to reap those benefits as soon as you can.

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