See two of my favorite strategies for delaying your Social Security retirement benefit. There are other solutions as well, but we get into the pros and cons (and a brief example) of working longer and spending from your savings.

The longer you wait to claim your Social Security benefit, the more you get. Your benefits increase by roughly 8% per year until age 70, but most people can claim as early as age 62. There’s a big difference between how much you get at age 62 and age 70. Unfortunately, it’s not as easy as saying “I’ll just wait.”

If you stop working before you take benefits, you’ll need a way to pay expenses before those Social Security payments come in. You can use your 401(k), IRA, or other retirement savings accounts to pay costs. Taxable accounts and other financial resources can also come in handy.

But it takes some careful planning to pull this off—you’re going to take significant withdrawals from your savings, so it’s crucial to run some numbers (of course, even that can’t guarantee success, but you can decide whether or not it makes sense).

Continuing to work for a while can also be helpful. Not only do you get an income, you can stay active and engaged. And if you’re not yet 65 and eligible for Medicare, any healthcare benefits you get from a job are extremely helpful.

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What about Roth conversions? Delaying Social Security can help provide an opportunity for partial Roth IRA conversions. With low-income years between the day you retire and the day you begin benefits, you can potentially pay some taxes at relatively low rates. Doing so might prevent future Social Security benefits from being taxable, reduce your RMDs, and potentially provide a tax-free source of funds to draw on as needed.

Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration. Always consult with a CPA before making decisions or filing a return. This information may have errors or omissions, may be outdated, or may not be applicable to your situation….(read more)

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2 Ways to Delay Social Security for Bigger Benefits

Planning for retirement is an important aspect of everyone’s financial life, and one key component is Social Security benefits. While many people choose to claim their benefits as soon as they become eligible, there are strategic methods to delay receiving them that can result in bigger payout amounts in the long run. Here are two ways to delay Social Security benefits for increased financial security during retirement.

1. Work past full retirement age:

The full retirement age (FRA) is the age at which you become eligible for full Social Security benefits. This age varies depending on the year you were born, ranging from 66 to 67 for those born in 1943 or later. However, individuals have the option to delay receiving benefits even further past their FRA.

For each year you delay claiming Social Security after your FRA, your benefits increase by a certain percentage, known as the delayed retirement credits (DRCs). The DRCs amount to an 8% increase per year, up until the age of 70. By choosing to work and delay your benefits until age 70, the monthly payment you receive can increase by up to 32%, resulting in significantly higher payouts over your lifetime.

Working past full retirement age not only increases your Social Security benefits but also allows you to continue earning income. This additional income can support your current expenses and allow you to save more for retirement, reducing financial pressure in the future. Additionally, working longer can also contribute to an increased overall retirement savings.

2. Use a restricted application strategy:

Another way to delay Social Security benefits for bigger payouts is by employing a restricted application strategy. This option is only available to those who were born before January 2, 1954.

Under a restricted application, you can file for Social Security benefits but restrict the application to only spousal benefits. By doing so, you can receive spousal benefits while still allowing your own benefits to grow through delayed retirement credits until age 70. In other words, you can claim a portion of your spouse’s benefits while allowing your benefits to accumulate and increase.

By using this strategy, you and your spouse can maximize your combined Social Security income during retirement. Additionally, if your spouse claims Social Security benefits early, their own benefits can also increase by 8% per year by delaying until age 70.

Before opting for a restricted application, it is crucial to consult with a financial advisor or Social Security professional to understand the nuances and potential impact on your financial situation.

In conclusion, delaying Social Security benefits is an effective strategy to enhance your retirement income. By working past full retirement age and utilizing a restricted application, you can significantly increase your monthly payments and secure a more stable and financially secure future. While these methods may not be suitable for everyone, exploring all available options is crucial when planning for a prosperous retirement.