Even if you happen to be saving nicely for retirement, you may still find yourself becoming heavily dependent on Social Security once your paycheck falls away from work. And that’s why it’s important to get the most out of your benefits. With that in mind, here are some potential Social Security filing strategies for you to explore.
1. Postpone your submission as long as possible
You are entitled to your full monthly Social Security benefit based on your pay history once you reach full retirement age (FRA). FRA is 66, 67 or somewhere in between, depending on your year of birth.
You may sign up for Social Security from age 62, but doing so will permanently reduce your monthly benefit. On the other hand, if you delay your application beyond FRA, your benefits will grow at 8% per year up to age 70. And whatever boost you capture will be permanent.
Even if your nest egg is beautiful and robust, it pays to consider postponing Social Security until age 70 if you don’t need the money sooner. While you may run out of savings during your lifetime, Social Security is guaranteed to pay you a monthly allowance for the rest of your days. So the higher that benefit, the more financial security you get.
2. Submit on time while your spouse grows his benefit
If both you and your spouse are entitled to benefits, but your spouse is the largest earner, you can apply to FRA yourself while your spouse is e) defer their application until the age of 70. By signing up for Social Security at age 66 or 67 (or somewhere in the middle), you could generate enough income for your household not to put off retirement too long.
From there, your spouse can defer their application so that you can both share that higher monthly benefit once it comes in. And if your spouse is older than you, this strategy makes even more sense because if they die first, it can leave you with a higher survivor benefit.
3. Submit early and invest your benefits
Applying for Social Security early is risky because it could mean retiring later. But if you are a shrewd investor and plan to put that money to work rather than spend it, then you can get ahead financially.
To be clear, this strategy won’t work for everyone. Applying for Social Security early means you lose up to 6.67% per year in benefits compared to waiting for FRA. But if you’re confident that you can get a higher return from investing, the numbers can ultimately work in your favor.
Claiming Social Security is not something you should do on a whim. Instead, make sure you think carefully about your archiving approach. This could mean the difference between a financially sound retirement and a rocky one.
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