If you are 65 or older, most of your income is from Social Security, 52% for the average American. It’s a unique pension: it will last as long as you do, even if you live to be 120 years old. It will keep pace with inflation, the benefit rising each year to match the annual increase in the cost of living for most urban residents. And it is a life insurance policy to help your spouse when you are gone.
The best way to take advantage of this is to wait as long as possible to collect your check; that will give you the biggest cash bonus over your lifetime. Yet few people take advantage of this. Figuring, “I need the money,” or “I want to stop working, ” or “Social Security may not be around many more years,” lots of folks grab it immediately. For those born in 1945, some 42% of men and 48% of women start taking their checks at age 62, the earliest possible time. Only 28% of men and 23% of women delayed taking benefits till age 66, when you can get a full amount.
And even fewer, just 2% of men and 4% of women waited till age 70, when you can get a bonus. https://www.collins.senate.gov/sites/default/files/GAO%20report%20on%20SSA%20claiming.pdf
What you should do:
A- Don’t file for benefits till age 70. Each year you wait past 66, you get a bonus of 8%. This applies whether you are working or not. Unless you are ill and don’t expect top make it until your 80s, you should probably wait. A man who is 65 today can expect to reach, on average, age 84.3. A woman at 65 can expect, on average, to reach age 86.6, according to the Social Security Administration.
But they may not tell you about it.
The Government Accountability Office sent people to watch interviews at Social Security offices. In 26 cases, only 8 people were told they could get more money by waiting till age 70. Remember, the 8% annual bonus us guaranteed. The stock market can’t guarantee that for you.
How long will you live? Here is an estimator from the Social Security Administration:
B-Think of Social Security as life insurance payments for your spouse. When you die, your survivor will get your full Social Security benefit. The longer you wait to collect, the bigger the benefit. And that translates into the maximum benefit for your survivor. About 5 million widows and widowers are now receiving survivor benefits. Here is planning information about survivor benefits:
C-Use other money first to delay your Social Security benefits. If you have funds in an IRA, you can start withdrawals at age 59 1/2. The money is taxable at ordinary rates, depending on your income bracket. You can use these funds for living expenses while you wait till age 70 t0 draw the Social Security check. But I have some of that money in the stock market, you say. Why should I take it out now and give up my profits. Because the stock market has no guarantees. But Social Security will give you that extra 8% every year between 66 and 70, an ironclad guarantee. Better to do that with your funds than take a stock market risk.
