If you're like most people, Social Security will be a big part of your retirement income, and if
you want to maximize your retirement benefit, it might make sense to delay when you claim. That's
because you can get a raise of up to 8% per year. But waiting to take benefits isn't appealing to
everybody, so let's talk about the pros and cons and that way you can figure out what to expect
and maybe what pitfalls to watch out for. The Social Security administration assigns you a full
retirement age based on when you're born, the year of your birth, and that doesn't mean when you're
allowed to retire or should retire. Your full retirement age is the age at which you would not
get reductions in your benefits. So if you take your retirement income early you're going to get
less each month. Likewise, if you keep working after you take benefits and you have an income,
you could potentially face reductions in your benefit until your full retirement age. Things
also get interesting if you wait until after your full retirement age to take your retirement
benefit and that's because, again, you get those increases of up to eight percent per year. Those
increases happen from the time you reach your full retirement age or FRA until age 70 so there's no
point in delaying beyond age 70. By the way, I'm Justin Pritchard, and I help people plan
for retirement and invest for the future. Down in the description there are some free resources
linked to that cover this topic and give you some more pointers. For most people approaching
retirement these days, your full retirement age might be age 67 so that gives you a couple years
to delay. Now, in this case they have an example and the full retirement age is age 66. Their full
retirement age benefit is $1,000, or for every one thousand dollars of benefit, if you want to
assume a bigger benefit, if they were to claim early they would have only gotten $750 per month
that's a twenty five percent reduction but you can see this 8% raise if they delay by one year and
that continues for several years until age 70. The nice thing about that higher monthly income is not
just that you have more money to spend each month, but if you have a surviving spouse who takes over
your benefit and it has been increased with those delayed retirement credits, your survivor will get
that bigger monthly income as well. So not only does it affect you for the rest of your life,
it could also affect a surviving spouse. Another advantage of taking that higher benefit amount
each month is that occasionally the Social Security administration adjusts how much
you get each year those are called cost of living adjustments cola or COLAs and if you
get one of those increases it'll be based on the bigger amount you're getting. In other words,
if you delay for a bigger benefit, those inflation adjustments will also be bigger. A couple of
things to know about delaying though is that if you have a spouse who's taking a spousal benefit
off your work record (so this is not a survivor benefit but a spousal benefit off your work
record) that person would not benefit from delayed retirement credits. Instead their benefit is going
to be based on whatever your benefit is at your full retirement age. It might also be
nice to know that every month counts, so you don't necessarily need to wait for a whole year and get
that eight percent increase if it makes sense for you to claim on some other schedule maybe
six months or 19 months after your full retirement age, that's perfectly fine, each month gives you
a small credit that equates to 8% per year. Technically it's two-thirds of one percent
for each month but if you claim before age 70 you might not necessarily get that full amount until
the next January, so be aware of that if you're doing some budgeting. So what if you already
claimed benefits early and now you want to get a bigger monthly benefit from Social Security? Well,
it may be possible to suspend those payments and start taking advantage of some of those increases,
but you can only do that once you reach your full retirement age, and again it only happens
between FRA and age 70. So if you're not yet at your full retirement age, you may need to wait,
but if you have reached that you've got an opportunity potentially. Now when you're
planning for retirement and thinking about putting off Social Security it's crucial to get Medicare
right. You don't want to enroll late. If you miss the deadline there is a steep penalty and that can
last for the rest of your life so it's important to check with your employer, especially if you're
still working maybe putting off claiming. Check with your health insurance provider
and ask them exactly what you need to do and when so that you enroll in Medicare on time. Definitely
triple-check all of that. Now if you stop working but you're not yet at full retirement age or you
want to delay a couple of years how exactly do you make that work? That's a tricky situation
and the answer might be that you spend from your assets or your retirement savings for a while so
that you can eventually get that bigger benefit. There are some pros and cons of that and it
takes some careful planning and you might also want to watch what the markets are doing. If
there's a steep decline and that's going to result in you more or less decimating your retirement
savings early in retirement, then that's something you might want to avoid so you want to do some
planning and monitor what's happening out there so that you can make a smart decision. Now,
what if you're concerned that Social Security is going to run out of money and so you want to claim
early and delaying just doesn't make any sense to you? That is certainly a scary thought, and
a couple of thoughts on that one is the video that pops up here is going to talk more about
how Social Security might or might not run out of money, but it's also important to know that if you
do claim early, if there are reductions in Social Security because the system is struggling, your
reduction would be on an already reduced benefit versus if you delay and get a bigger benefit and
then it gets reduced you might have more money each month. So it's a tough decision, and I hope
this has been helpful for you. If it was, please leave a quick thumbs-up, thanks, and take care