Is waiting to get your Social Security payments a good idea?

Understanding the basics of Social Security, even if your retirement is still decades away, is extremely vital. You simply must have a good understanding of not just when you can take out your funds but, more importantly, when you should.  If you’re already in the process of planning for retirement (and you should be, no matter how old you are) knowing this information can help you to determine how much money you actually need to  save.

In its simplest terms, during your working years you paid into Social Security through taxes, and built up benefits that you will receive once you reach retirement. While this may seem simple, effective that retirement age varies based on a number of things, including your birthday. Also, the amount of benefits that you get either increases or decreases based on when you actually start receiving them.

Specifically, each month past the specific retirement date that is assigned to you based on your birthday, the funds in your Social Security will grow, until you reach the age of 70.

Calculating your lifetime earnings

When Social Security is determining how much your monthly benefit checks will be, the first thing they consider is what they call your “lifetime earnings”. They also take into account your average life expectancy and the actual date that you begin to collect. Even though how long you live affects the best time for you to start collecting, since it can’t be predicted with certainty it’s very difficult to say.

Keep in mind is that, for every year that you wait until you reach the age of 70, your retirement monies from Social Security will increase by 8%.

What are the tax implications?

Another reason to delay getting your Social Security benefits is to avoid taxation. Some people that withdraw Social Security right away also withdraw money from their IRAs, 401(k)s and 403(b)s in order to have enough to cover their monthly expenses. These withdrawals however can actually push you into a higher tax bracket and cause more of your Social Security benefits to be taxed.

What are the drawbacks of waiting?

If you have a family history of early death, or perhaps are suffering from a disease process that may end your life sooner, then there’s really more of an incentive to take out your Social Security as fast as you can. You may also need the money to pay for basic needs like housing and food, in which case taking it out only makes sense.

The fact is that the decision rests on your shoulders as to when is the best time to start taking your Social Security payments but, whenever possible, it’s best to leave them alone as long as possible in order to build your funds higher.

Of course one of the smartest things that you can do is talk to a financial expert who has your best interests in mind and find out what their opinion happens to be. Everyone has different situations and circumstances and these will definitely play a role in whether to take your Social Security funds out quickly or leave them in longer.

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