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Leverage Your Age to Secure Your Financial Future
In a recent newsletter dated late 2024, Suze Orman highlights the challenges faced by Americans in retirement planning, particularly for those with limited income sources beyond Social Security. “So few workers have access to traditional pensions that offer guaranteed retirement income,” she points out. “Additionally, the 401(k)/403(b) system is fraught with pitfalls that can easily derail one’s plans.”
Without a substantial nest egg for retirement, heavy reliance on Social Security may become necessary. While depending on benefits isn’t necessarily negative, the system can be complex, especially when it comes to maximizing monthly payments by selecting the right claiming age. Orman suggests that individuals in good health in their 60s should delay starting to receive Social Security benefits for as long as possible, as this can significantly enhance retirement affordability for those with limited income sources.
Maximize Your Benefits by Adjusting Your Claiming Age
When choosing a start date for Social Security benefits, understanding your full retirement age (FRA) is crucial. This typically falls between ages 66 and 67, depending on your birth year, and claiming at this age grants you 100% of your benefit based on your work history. Filing before your FRA will lead to reduced payments by up to 30% per month, while waiting until age 70 can yield a full benefit plus an extra 24% to 32% each month.
For instance, if your FRA is 67 and you would receive $2,000 monthly by claiming at that age, filing at 62 would result in a 30% cut, leaving you with $1,400 per month. Opting to wait until 70 to claim would entitle you to the full $2,000 per month plus a 24% bonus, totaling $2,480 monthly. In this scenario, the difference between filing at 62 and 70 could amount to $1,080 per month, potentially making a significant impact on your retirement income if Social Security is a primary income source.
Considering Your Health and Life Expectancy
Orman emphasizes that individuals in good health in their early 60s should take into account their health and potential life expectancy when deciding to delay benefits. While delaying could boost your monthly payments, it may not be the best choice if you have health issues or anticipate a shortened lifespan. Although predicting longevity is challenging, estimating your retirement years can help you make a more informed decision on when to file for Social Security.
Ultimately, delaying Social Security benefits can enhance monthly payments significantly, but the optimal claiming age varies based on individual financial objectives and health considerations. By aligning your claiming age with your retirement goals and health outlook, you can make a well-informed decision to optimize your long-term income in retirement.
Unlock a $22,924 Social Security Bonus Most Retirees Overlook
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