1/31/2013 6:45 PM ET|
5 reasons to delay Social Security
It's tempting to sign up for a guaranteed monthly payout as soon as you're allowed, but the case for waiting is strong.
One of the most critical retirement decisions a soon-to-be-retired worker needs to make is when to collect Social Security benefits. Having dependable income as early as possible certainly relieves a lot of the anxiety that can come from losing a regular paycheck, but you shouldn't ignore the huge increase in benefits if you delay collecting Social Security.
The best age to claim Social Security will be based on each person's circumstances. But, in general, delaying Social Security is going to be the better choice. Here are a few reasons why:
The biggest retirement risk is longevity, and delaying Social Security will reduce the risk of running out of money. If you delay Social Security benefits, you will get a bigger check every month. That means more stable income you can count on even if you miscalculate your retirement planning and spend every penny of your savings and investments. Your monthly payments will increase by 7% to 8% for each delayed year, which could have a huge impact on your retirement finances.
Each cost of living adjustment (COLA) will be bigger. Social Security benefits increase by a percentage of the current payout to keep up with the cost of living. If you start collecting a higher amount by delaying your start date, the same percentage COLA increase will have a higher dollar value.
You can minimize the chance of regret. A retiree will generally get a larger lifetime benefit after age 78 by delaying claiming Social Security benefits. This means that if you live past 78, you might wish you hadn't taken benefits early because your lifetime payments will be smaller than if you had delayed claiming. A person who does not live past 78 would have been better off claiming earlier. (This example compares the start of benefits at age 62 and at age 66.)
You can convert your pretax nest egg to a Roth IRA at a lower tax rate. A portion of Social Security payments could be subject to income taxes. By delaying Social Security during the early part of your retirement, the monthly payments will not be included in your adjusted gross income. This means you can convert your pretax nest egg, including a traditional 401k, to a Roth individual retirement account at a low tax rate.
Let's say a couple no longer has regular income because both spouses have retired. Based on 2012 tax brackets, they could convert up to $70,700 of pretax income to a Roth IRA and pay just 15% of that amount in taxes. After that, all investment income derived from that $70,700 throughout their lifetime will be tax-free once the money is in a Roth IRA.
There are some nuances, of course. Roth conversions have the potential to increase your risk of a tax audit. So, it's a good idea to speak with a tax professional before attempting such a move. However, this could be said about anything that adds complexity to your tax return, and making the conversion could be a huge benefit for those who can take advantage of this tax maneuver.
The odds of living longer are increasing. With advancements in medicine and wellness research, many people are living longer. Delaying benefits will likely be the better choice for healthy retirees. While waiting to claim your benefit certainly has costs, it will give you more income in your later years when you are likely to need extra money the most.
More from U.S. News & World Report:
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Franklin D. Roosevelt: Participation in the program would be completely voluntary, no longer voluntary and that participants would only have to pay 1% of the first $1,400 of their annual incomes, now 7.65% of the first % $90,000 and going up. The money the participants elected to put into the program would be deductible from their income for tax purposes each year, good luck with that one, under Bill Clinton and Al (Green Gore), with Gore casting the tie braking vote as president of the senate, no longer tax deductible. That the money was to be put in an independent "trust fund" and therefore, would only be used to fund the Social Security Retirement Program, but, under Kennedy/Johnson was moved to the General Fund and spent, and then they tell us that the Social Security Program is going bankrupt; not because of us! That the annuity payments to the retirees would never be taxed as income, but, again under Clinton/Gore , up to 85% now can be taxed. So, if you want to give away your money, please contact me I'll take it.
For me, I did the math and if I wait and take my SS at 66 instead of 62, it will take until 85 to brake even.
Everybody should do the math--
Brought to you by the Federal Government--------------Would all you retirees please hurry up and die, we have
alot of other things we need to do with your money////////////////////////////////////
That means more stable income you can count on even if you miscalculate....."
There is no more inherent stability in claiming SSI benefits sooner or later. Total babble.
An aspect to consider with retirement age is how well the person is holding up with his/her occupation.
A person experiencing significant stress on the job, five-days-a-week, they may be better off taking early retirement. Negative stress has a cumulative effect on individuals.
If a person puts off retirement until age 66 or later, that means over 800 additional stressful workdays that will wear on the individual. And we are fairly aware that stress can create health issues.
So, a person collects more money at age 66 (than at 62), with the probability that the additional income will be plowed into covering health expenses that Medicare does not cover.
And how does one enjoy retirement when plagued with ailments?
Congress can raise the debt ceiling, so they can send more foreign aid to countries like Israel, Somalia, etc. etc.. Yet they owe the social security system approxiamtely 3 trillion that they siphoned off, to pay for other stupid things like unnecessary wars, high salaries for useless politicians that are bought by lobbyists Everything we have to pay for is done through borrowing. It's the only way that the federal reserve allows money to be created. They bankers get the interest on all of that borrowing, even though they create the money electronically, on the borrowers promise to pay it back to the banker.
Pretty good racket. Get to create money to loan, that they never had, out of thin air, at interest, with the ability to foreclose on the homes and other assets if payment isn't made. The slavery part comes in when we realize that all money is created in this manner. I would certainly profit if I could create money to loan at interest, with the touch of a computer key. It wouldn't take too many loans to make the bank very profitable.
Think about a home mortgage loan for about $200,000. This loan would generate approximately 400,000 in interest for the banker over 30 years! All the banker had to do for that money, was two weeks or pre-mortgage paperwork, and sending out a monthly statement for the next 30 years. If that isn't mortgaging a large portion of your next 30 years of productivity, I don't know what is!
Keep in mine, that no money is created in the loan process to address the interest on any loan, and that means that the money you earn to pay that interest, or your entire loan for that matter, has to come from the debt principal of someone's loans that have been spent into circulation, making that ponzi money available for you to capture through commerce, thereby enabling you to make that loan payment. If for any reason you fail to make that payment, you can be foreclosed on, or have liens put on your income.
We are at the mercy of the banks. If we don't continually borrow, the system collapses and we can lose everything. Some power that congress has given to the federal reserve huh? Once the social security funds were put into the general fund, sticky fingered members of congress had their way with 3 trillion of the funds, and put the fund in danger of an early demise, selling the public down the drain just to appease the bankers and allow their ponzi scheme to continue.
How money is created and how it gets into circulation is the problem. If it's borrowed and spent in, it is debt money that mortgages our future productivity. It has to be paid back with interest to the lender, and no money was created to pay that interest in the loan process. When the monthly payments are made, money owed on the principal is erased from the balance owed, minus the interest payment that goes to the banker, that no money was created to pay.
If it is earned and spent in, it is wealth money. It is owed to no one, and doesn't carry an interest debt. When wealth money is spent into circulation, it lives on. It is evidence of man's productivity.
Congressmen will not bring up changing the system. They have the bankers lobby there donating to their reelection campaigns. Don't worry, congress will let the social security system that you have paid into for so many years fail. They don't care if you have paid for a dead horse, as long as they get theirs. Wake up people.
Remember that Obama wants all of us to work up to our retirement date and then please die the next day
because he has better use for that money than you do/////////// Remember be an American and take one
for the team///
Mr. Ning's article nicely puts a point not often clarified:
"A retiree will generally get a larger lifetime benefit after age 78 by delaying claiming Social Security benefits. This means that if you live past 78, you might wish you hadn't taken benefits early because your lifetime payments will be smaller than if you had delayed claiming. A person who does not live past 78 would have been better off claiming earlier."
Without considering one's family longevity (both sides as far back as is known) and health stats (cancers? diabetes? heart disease?), or your financial portfolio, this metric of "beating the life expectancy tables" will become more meaningful the younger you are.
For those with few years before 65, they'll have a good chance of not beating the tables -- or not beating them by much. For those born in the 1960s and later, they'll probably find they live well into their 80s (or beyond).
But those born into families with poor medical histories should give weight to an earlier claim, just as those with long lives on both sides should weight toward a later claim.
But in any case, if one has investments at good rates of return now but would need to liquidate them for liviing expenses unless they claimed SS "now," they would do well to weight their decision toward an earlier claim, in order to leave their solid investments growing for their out years.
OK folks, you really need to KNOW what your projected benifits will be. SSA can give you the real numbers, you can find out what your payments will be at any age from 62-70. If you haven't created an account you should, and you should track it at least yearly. Here's the URL
The important thing to remember is your health and attidude should be the major consideration, not a kneejerk anti-government reaction. I have looked at all the numbers for ME. The break even point between retiring at 66 or 70 is 81. If I had retired at 62 it would have been 69 and a few months.
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