Suze Orman: 3 Pros and 2 Cons of Taking Social Security at 67 or 70
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Americans can begin claiming Social Security benefits at 62. Unfortunately, claiming early will cost you. 'If you are in your late 50s and in good health, you should seriously consider the upside of delaying when you start, so you can earn a higher benefit,' Orman wrote in a Facebook post.
Orman isn't wrong, either. Full retirement age (FRA) is 67. Waiting to claim will add 8% to your annual benefits once you start collecting benefits or you reach 70 years old, according to the Social Security Administration (SSA). This can be a great way to increase payouts, especially if you don't need the funds now.
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Continuing to work is a reality for many retirement-age Americans. Over 11 million Americans over 65 are still working, according to the Bureau of Labor Statistics (BLS).
While it is possible to have earned income on Social Security, it will be costly for those taking benefits before FRA. You can earn up to $23,400 if you claimed benefits under 67 before payments are reduced. That number increases to $62,160 if you claim at FRA.
Orman advised Americans to consider what will be best for their long-term future. 'I encourage you to keep returning to this thought exercise: What are the financial steps you might take today to be kindest to your future older self? The 88-year-old. The 90-year-old. The 95-year-old,' Orman wrote on her website. If you don't need the funds now, waiting will greatly benefit that older version of you.
Survivor benefits can be a crucial help after the death of a spouse. Regardless, the surviving spouse can only receive one monthly benefit, not two.
'If your household expects Social Security to cover essential expenses, consider how your income may change in the future. When a spouse passes away, the survivor can only collect one benefit–their own or their spouse's. That means a potential drop in monthly income,' Orman wrote in a Facebook post. Delaying benefits until 67 or 70 for the highest income earner can provide a good way for the surviving spouse to receive the highest benefit possible.
Claiming Social Security isn't a one-size-fits-all solution. Health can play a sizable role in the decision to receive benefits. Waiting until FRA is financially beneficial, but it may not work for Americans with serious health concerns.
'If you arrive at age 62 in poor health, claiming your benefit early may make sense,' Orman wrote on her website. Holding off until FRA could pose challenges for Americans facing serious health issues. A 65-year-old retiring in 2024 could expect to spend $165,000 on health care in retirement, according to Fidelity. Receiving benefits before FRA could help those in need manage their finances better.
Delaying receiving Social Security benefits directly results in receiving more money. Orman is known to push waiting as long as possible to claim benefits.
However, for Americans without sufficient savings or investments to cover their needs, claiming before may be wise. The lure of more cash is useless to people in need. 'Of course, if you need the income at 62 you are going to claim,' Orman wrote on her website. If you're 62 and need consistent income, delaying receiving it will likely only harm you.
Taking Social Security benefits is a personal decision. Waiting until FRA to claim provides numerous benefits, but if you're in need before getting payouts, claiming early can be a welcome relief.
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This article originally appeared on GOBankingRates.com: Suze Orman: 3 Pros and 2 Cons of Taking Social Security at 67 or 70
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