When you first claim Social Security benefits, you lock in a base amount. If you delay filing for retirement benefits until age 70, your payments will be about 76% higher than if you had claimed at age 62. Once you start claiming, your income is mostly fixed and only increases with the annual cost-of-living adjustment (COLA).
Delaying Benefits for Higher Payments
When you reach full retirement age (between 66 and 67, depending on your birth year), you can choose to suspend your Social Security benefits. By doing this, you earn delayed retirement credits. Each month of suspension increases your benefits by 8% per year, up to age 70. This could boost your benefits by 24% over three years.
Is Suspending Benefits a Common Strategy?
It’s unclear how many people use this strategy. The Social Security Administration (SSA) doesn’t track this specific data. Financial planners, like Leanna Devinney from Fidelity, mention that it’s rare for clients to use the “file and suspend” strategy.
Differences Between Benefit Strategies
The “file and suspend” strategy is different from the “file and withdraw” option. With “file and withdraw,” you can stop benefits within the first year of claiming, repay all received amounts, and then reapply for higher benefits later. This is less common because repaying benefits can be financially difficult.
Benefits of Suspending Social Security
Suspending your benefits until age 70 won’t result in larger checks than delaying the initial claim until 70, but it can be helpful. Some people claim early due to financial insecurity but later find they have enough income from other sources. This strategy can help them maximize their Social Security benefits.
Impact on Survivor Benefits
Delaying benefits can also increase survivor benefits for your spouse. The longer you delay claiming (up to age 70), the larger the benefit your spouse will receive if you pass away first. Survivor benefits allow a spouse to receive 100% of the deceased spouse’s benefit at full retirement age.
FAQs
1. What is the best age to start claiming Social Security benefits?
The best age depends on your financial situation and health. Delaying benefits until age 70 can significantly increase your monthly payments.
2. How do I suspend my Social Security benefits?
You can request to suspend your benefits once you reach full retirement age by contacting the Social Security Administration.
3. What is the difference between “file and suspend” and “file and withdraw”?
“File and suspend” allows you to stop benefits after reaching full retirement age and earn delayed retirement credits. “File and withdraw” lets you stop benefits within the first year and repay them to reapply later.
4. Can I change my mind after suspending my benefits?
Yes, you can restart your benefits at any time before age 70.
5. How does delaying benefits affect my spouse?
Delaying benefits can increase the amount your spouse receives if you pass away first, maximizing survivor benefits.
Understanding the options for maximizing Social Security benefits can have a significant impact on your retirement income.
By considering strategies like suspending benefits and delaying your claim, you can ensure a more comfortable and secure financial future.
Always evaluate your personal situation and consult with a financial planner to make the best decision for your needs.