Social Security - Delayed Retirement Credits
Most people are familiar with the potential drawbacks of receiving benefits before they reach full retirement age(FRA). But many people are not familiar with all the potential benefits of waiting beyond FRA to receive social security benefits. Each month that you postpone benefits past the month you turn 66, you are eligible to earn an additional .67% a month, or 8% a year until you reach age 70.
For Example, let’s assume you are eligible to receive your primary insurance amount of $2,000 per month if you wait until you reach 66 (FRA). If you decide to wait until age 70 or any year up to age 70, you will receive an increase of 8% for each deferred year. The 8% return is guaranteed and cost-of-living adjusted. The amount you would be entitled to receive at age 70 is $2,640 per month, or $31,680 a year.
There are various factors to consider whether waiting beyond full-retirement-age to file for benefits is the right choice for you, but in most cases, the “break-even” point is somewhere around a person’s life expectancy. It therefore becomes a personal wager to outlive your life expectancy. However, a critical aspect that gets overlooked in the decision is the increased survivor benefit available to your surviving spouse if you wait as long as possible to begin receiving retirement benefits. Using the above example, assume your spouse’s retirement benefit is only $1,200 because of low earnings or non-employed for several years (i.e., homemaker). If you "pass away" before your spouse, and you waited until age 70 to receive your benefits, your spouse’s monthly benefit would increase from $1,200 to $2,640 for their lifetime (see above chart).
At Carr Wealth Management, LLC, we specialize in identifying the optimal claiming strategy tailored to each client’s needs. Please contact us to schedule a no-charge consultation or if you simply have a question about Social Security Benefits or other financially related planning areas.
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