After years and years of paying into the Social Security system, many Baby Boomers nearing retirement age are eager to start collecting the benefits they have earned. While you are eligible to begin collecting benefits at age 62, doing so can cost you thousands of dollars over a lifetime! How?
For every year that you delay collecting Social Security benefits, the amount of the monthly payment you receive increases. While an increase of a few dollars each month may make you question whether delaying benefits is worth it or not, those few dollars each month can really add up over a lifetime. Also, if you live longer than you’ve anticipated, delaying benefits can help keep you living comfortably because you’ll have more money to work with as other resources and savings are depleted.
Here’s an example for you that was recently on CNN Money:
61-year-old Mary, who currently earns $55,000, is deciding when to retire. If she were to file for Social Security benefits next year at 62, she would receive around $15,400 a year, according to T. Rowe Price's Social Security benefits evaluator. If she waits until 66, however, her annual benefits would grow to around $20,500 per year. And if she is able to hold off for several more years, until age 70, her annual benefits would climb to roughly $27,100 per year.
Delaying benefits until age 70 as this example suggests won’t work for everyone. You have to create a plan based on your own individual circumstances. Your plan will depend on your other retirement resources, financial situation, your spouse’s plans and how you plan to spend your time during retirement.
Strategies for Delaying Benefits to Consider
For many baby boomers, the best way to delay retirement is by continuing to work until they are at least 66, full retirement age. If this is not an option for you or you can’t continue in your current role for some reason, finding part time work for a few years may help bridge the gap.
Again, the strategy you choose should be based on a number of factors including your overall health, your overall financial situation and your plans during retirement.
For more information about strategies to maximize your Social Security benefits request a copy of our free guide, Social Security Planning for Baby Boomers.