As the official age for full retirement moves closer to 67 over the next few years, many taxpayers wonder what steps they should be taking in order to maximize their Social Security benefits. Do you start taking those retirement benefits as soon as possible? Or do you wait it out, so you can get a higher check later on?
Everyone’s circumstances are unique. Reviewing a short list of items for how Social Security works can help point you in the right direction. Finding the right path forward may require the insight of a tax or financial professional, but these considerations are a good place to start!
The Social Security Benefit Basics
Individuals can start receiving their Social Security retirement benefits right when they turn 62. But that doesn’t mean you should make that your official start date. For those born in 1960 or later, the full retirement age is 67. If you begin taking your benefits before your full retirement age, the total amount of money you’ll receive is going to be reduced.
Opting to delay your start date past age 67 could give you an 8-percent bump for your check payments. This “bonus payment amount” is applied to each year past your full retirement age and maxes out at age 70. For example, if you wait to take your Social Security until age 68, then you’ll have an 8-percent increase for your payment amount. Waiting until age 69 would have a 16-percent bonus. But waiting to take your benefits past age 70 has no added bonus. You will have already reached the cap for the maximum amount of Social Security you can receive.
When to Take Social Security
Delaying your Social Security benefits until age 70 certainly has its appeal, but there are a handful of reasons why you may or may not want to wait. If you have a long – life expectancy, it may make sense to delay your benefits in order to receive a bonus. But if you’re in poor health, taking your benefits sooner than later might be wiser.
Additionally, if you already have reliable income streams, waiting to take Social Security could be a smart call. Holding out for an 8-percent increase, when possible, makes clear financial sense. Plus, when you have other income and haven’t yet reached the full retirement age, those Social Security retirement benefits could be taxed. That’s why it’s usually best to wait as long as possible (up to age 70) before you claim them.
Find the Right Plan with NSO
Thinking through all of the possible scenarios for your Social Security benefits can be confusing. But you don’t have to run the numbers all on your own. Scheduling a time to talk with our team can help you get the information you need to make the right decision for your situation.
NSO and Company is proud to work with individuals, families, and businesses through all stages of their tax planning and tax preparation. If you need help analyzing your finances to make sure you’re on track for your tax responsibility, please don’t hesitate to give us a call at (317) 588-3131. We’re here to help!