Now or later? Reasons to avoid early Social Security benefits
(InvestigateTV) — We all contribute to Social Security with every paycheck but questions about the program’s funding and future have people worried.
“The truth of the matter is, no politician is going to let Social Security fail,” said Robert Brokamp, senior advisor at The Motley Fool. “So, you shouldn’t be scared into it because it’s a mistake that’ll be with you for the rest of your life.”
Brokamp urged people to avoid being pushed or scared into claiming benefits early, even though they are allowed to access benefits before their “normal retirement age.”
“Well, when you claim Social Security is up to you. You can do it as soon as 62. Or you can wait until age 70,” he explained. “And for every year you delay, your benefit will go up anywhere from 5 to 8%, depending on your age. So, if you can delay taking Social Security, you’re going to create a bigger foundation of safe income that adjusts for inflation every year and is partially tax free.
Brokamp says there are a few reasons to delay. One is to avoid losing benefits if you’re still working.
“For most people who are working, their full retirement age is 67. If you claim social security before that and you’re still earning income, you could have to give back some of your benefits,” he cautioned. “Now once you reach age 67 you can earn as much as you want, and you won’t reduce your benefits.”
Another benefit to waiting is locking in a higher monthly payment and getting an extra boost from inflation adjustments.
“The cost-of-living adjustment is actually applied to your future benefit as well,” he said. “So, you may hear, ‘Oh if I delay social security my benefit will get bigger 5 to 8 percent per year,’ but it’s actually better than that. It’s 5 to 8 percent, plus inflation.”
Brokamp noted that some people – particularly those with health issues or in a financial pinch – may need to start early. But for those that can, holding off can pay off.
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