When Timing Really Is Everything
Submitted by Frye Financial Center on December 26th, 2019
Delayed Gratification Pays Off: The Longer You Wait, The More You Get
Data from the Social Security Administration shows that 39% of women and 33% of men chose to start collecting at age 62. Just 5% of women and 7% of men waited to age 70. Barring extenuating circumstances, being part of the majority claiming benefits early can be a very costly mistake.
Rising Life Expectancies Must Be Considered
Tempting though it may be to chuck it all in and start claiming benefits at your first opportunity, this is ill-advised and hurts recipients in the long run. With expanded life expectancies, those who reach age 65 next year can be expected to live another 20.4 years, according to Social Security projections. Americans who turned 65 in 1983 lived an average of 17 additional years.
Delayed Claiming Makes More Sense Than Ever
Those who take the option of collecting early can claim benefits as early as 62, but they receive 5 to 6.6% less each year - a kind of "early retirement penalty" - depending on their age when they begin drawing payments. These early option penalties, enacted decades ago, are now too large in light of increased life expectancies. Current conditions increasingly favor delayed claiming. Those who delay collecting until beyond their full retirement age get a credit of 8% each year up to age 70, the maximum age of eligibility.
So what's a person planning for retirement to do?
- Earmark as much of your earnings as you can for your retirement savings accounts, and take advantage of any employer match programs.
- For business owners, maximize your retirement plans' tax savings at every opportunity.
- Consult with your CPA on a regular basis to ensure you're not missing any new opportunities as tax laws continue to evolve.
- Delay claiming your Social Security benefits for as long as you can to maximize the amount of YOUR hard-earned money you get back for your retirement years.
- As always, we are here to talk through these and any other issues on your mind as you fine-tune your retirement planning options and strategies.