Increase Your Retirement Benefits and Be Secure
More and more financial planners are helping clients find the best time to begin collecting Social Security. Among the many issues to consider are the tax impact, the income from ongoing work, the income from tax-deferred accounts (401(k) or an IRA) and whether one spouse has already started collecting. When it comes to increasing your retirement benefits, here are a few options to consider:
File and suspend: This strategy helps married couples with a longer life expectancy increase their returns. If the husband has started collecting Social Security at 62 and the wife hasn’t, then he suspends his benefit at 66 and restarts it at 70. Meanwhile, the wife will file for spousal benefits at 66 and then file for her own full benefit at 70. You can suspend benefits at no cost.
Suspending vs. withdrawing: If you begin drawing Social Security and then change your mind within 12 months, you might be able to withdraw your application. Keep in mind, though, that you may be liable for repaying all the benefits you received in order for your request to be approved. After you have been collecting Social Security for 12 months, you can’t withdraw. However, you can suspend payments once you reach full retirement age, and up until age 70.
Advantages of delaying benefits: You can increase your benefits by 8 percent for each full year by waiting. If you were born between 1943 and 1954, and you delay benefits until you reach 70, your payments could be as much as 32 percent more than what you would have collected at 66. In addition, if a higher-earning spouse delays benefits until 70 and then dies first, the surviving spouse receives a higher survivor benefit.
What Works Best for You?
If you’re feeling overwhelmed or anxious about the many choices available, don’t panic. Find an experienced financial planner who can explain the various options. In the meantime, there are several websites you can turn to for information:
- Social Security Timing (www.socialsecuritytiming.com) helps married couples compare hundreds of timing combinations for taking retirement benefits.
- Maximize My Social Security (www.maximizemysocialsecurity.com) determines the highest payments until the age of 100, instead of across life expectancy.
- AARP’s calculator (www.aarp.org/work/social-security) will also help you crunch the numbers.
- The SSA explains suspending benefits (ssa.gov/retire2/suspend.htm) and delaying payments (ssa.gov/pubs/ageincrease.htm).
Whether you opt for delaying, suspending or withdrawing, the sooner you begin retirement planning, the better. As several financial planners have noted, looking at Social Security in a vacuum just isn’t wise for most people, especially when there are surviving spouses and other family members to take into consideration.
Have you already begun retirement planning? If you’re following any of the strategies listed above, we’d love to hear about it! Please add your comments in the field below.