If Social Security is on your radar, you’ve probably heard the conventional wisdom that it’s helpful to delay you filing as long as possible. The reason for delaying is that the longer wait to file, the higher your benefit will be.
You can file as early as age 62. However, your full retirement age (FRA) is probably between your 66th and 67th birthdays. If you file before your FRA, your benefit is reduced by up to 30 percent. The reduction is permanent, so it can have a big impact on your retirement income.
You can avoid the reduction by delaying your filing to your FRA. At that point, you can receive your full benefit with no reduction. However, there’s nothing that says you have to file at your FRA. By delaying your filing past your FRA, you can actually increase your benefit amount. Social Security gives you an 8 percent benefit credit for every year past your FRA that you delay your filing. The credit ends at age 70.1
But what happens if you reach age 70 and you’re still not ready to file? Is there any benefit to delaying your filing past age 70? Maybe you don’t need the income. Whatever the reason, you may be thinking about delaying your filing well past age 70. Below are some tips to consider as you make your decision:
Social Security at Age 70
As mentioned, benefit credits for a delayed filing stop at age 70. That doesn’t mean you have to file for Social Security at that time, but your benefit will no longer increase if you don’t file. Instead, your benefit amount at age 70 will stay level, and that’s the amount you will receive when you eventually do file.
However, there’s still one way in which you could increase your benefits after age 70 even though Social Security doesn’t offer annual delay credits past that age. Your Social Security benefit amount is based on your average earnings during your highest-earning 35 years of work.
If you continue to work past age 70, your earnings in those years could replace lower-earning years from earlier in your career. That could boost your average earnings for your career and potentially increase your benefit amount.
Social Security and Taxes
Taxes may be another consideration. Your Social Security benefits may be taxable, depending on your income in retirement. The higher your income, the greater the amount of your benefits that are taxable. However, no one pays taxes on more than 85 percent of their Social Security benefit.2
If you have significant retirement income, you may be hesitant to add another taxable income source, especially if your income crosses the threshold to be taxed on 85 percent of your benefits. You may be specifically concerned if you feel the income would push you into a higher bracket.
Generally, your Social Security benefit is likely to be a net positive in your financial picture. If you’re concerned about the tax implications, however, you may want to consult with a financial professional.
Not sure when you should file for Social Security? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
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