Three rules you need to know if you want to delay your Social Security claim

There are pros and cons to those who defer claiming Social Security.

Knowing three main rules can help retirees choose the right time to start receiving benefits.

Retirees can earn deferred pension credits by waiting to apply for Social Security


Retirees can earn deferred pension credits by waiting to apply for Social SecurityCredit: getty

When a retiree delays their entitlement to Social Security, it means they have chosen to defer claiming pension benefits beyond age 62.

This is the earliest age at which retirees can claim benefits.

Waiting to apply after age 62 can increase benefits paid, and waiting long enough can increase the amount of your lifetime benefit.

Here are three considerations for those preparing to claim Social Security.

After age 70, you cannot earn deferred pension credits

If retirees wait until full retirement age (FRA), the benefits paid to them increase, meaning a larger percentage of the retiree’s lifetime annuity is paid.

The full retirement age (FRA) is between 66 and four months and 67 years. The year and month you reach your FRA depends on your year of birth.

According to FRA, pensioners can also earn late retirement credits.

the Social Security Administration (SSA) defines deferral credits as credits that you use to increase the size of your retirement benefit.

Retirees earn credit for each month between their FRA and the month they turn 70. These credits add up to 2/3 of 1% per month.

Overall, late retirement credits can sometimes mean an 8% annual increase in lifetime benefits.

The most important thing to know about deferred retirement credits is that there is a limit – they can only be earned up to the age of 70.

That means there’s no point in delaying a claim past 70.

Your spouse can only claim the spouse’s pension if you do so

If a retiree decides to claim Social Security, it may affect their partner as well.

Spouse benefits amount to up to 50% of the standard benefit of the main earner.

If the partner applying for Social Security is not already receiving a Social Security pension, then neither can their partner.

This is an important consideration if your partner has no or a significantly lower income.

You may have to outlive your life expectancy to break even

The third and final consideration is life expectancy.

For example, if you wait until age 70 to claim benefits, you will have to make up eight years of lost income.

This means you would have to receive payments for more than eight years once your payments start to break even.

Depending on how many years you live, you could end up receiving fewer benefits than if you had applied at age 62.

It comes down to the retiree’s comfort level with uncertainty.

We also reveal the four things you should know about Social Security tax and the five things you need to do before applying for Social Security.

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Caroline Bleakley

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