Should You Wait Till Your 70 to File for Social Security?

Health Wellness

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In today’s America, pensions are fast becoming a thing of the past. Fewer companies can afford to offer pensions to their employees any longer. Even a number of government employers are finding it impossible to pay for the pensions of retiring employees.

Over the past couple of months some states, like Kentucky have seen mass protests and demonstrations by teachers because the state is wanting to change the pension for teachers, converting new teachers to more conventional retirement programs like 401Ks.

This is leaving many older people to turn to Social Security as their main means of income in their later years but even this is tenuous as many predict that Social Security will be broke in 20 years.

When Social Security was first established, it was designed as only a supplement to pensions and a temporary one at that. At the time, the average lifespan for retirees reaching Social Security age was only 5 years and that’s with them starting to collect at 62, the youngest age with the lesser benefits.

Today, Americans are living 10-20 years and more past retirement age and being forced to rely on their Social Security, but the big question many have to face is at what age to file.

One source recommends waiting to you reach age 70 and they give three reasons why:

  1. You will most likely continue to work into retirement, so waiting till 70 will give them a higher amount of Social Security by waiting.
  2. If you earn more than your spouse. Two years ago, the government closed a loophole known as ‘file and suspend’ which allowed one spouse to file for benefits at full retirement age and then suspend them while the other spouse collects their benefits. Suspending one’s benefits allowed them to grow. This is no longer available, so spouses are recommended to wait until 70 to file they get the highest benefit possible.
  3. Live off your income and savings until you reach 70 to maximize benefits.

These recommendations are great IF you earn enough to survive and can afford to wait until you are 70. The problem is that many companies find a way to legally layoff older workers so they can pay younger workers less and because younger workers generally mean lower cost of healthcare benefits.

This is what happened to my wife and I. We had no alternative but to file for Social Security at age 65. I managed to find some work but for the first year, I was limited on how much I could earn without paying a penalty at the end of the year. Once I turned 66, I can earn as much as possible without any penalty.

Here is also something to consider that the source did not consider. Will you live long enough to break even on the difference between what you will get at 65 versus waiting to 70.

I worked at a utility for 11 years, qualifying me for a small pension. I could start drawing the pension at 62, 65 or 70. The longer I waited, the higher the pension. I calculated that if I waited until I turned 65 to draw the pension, I would have to live until I turned 81 to break even when compared to drawing it at 62.

The same principle applies Social Security. You may draw $500 a month more by waiting till you turn 70 was compared to drawing it 65 but in the long run, you will have to live for at least 15 years just to break even on the total amount of your benefit.

It’s a tough decision and everyone’s circumstances are different. Don’t rush into your decision but take the time to weigh all factors, including your health. Waiting until you are older will get you more benefits but will you live long enough to enjoy it?

Retiring Social Security

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