Can You Delay Social Security?
Many people say that they fear running out of money after they retire. Protect your future income by making a smart choice about when to begin taking Social Security. The program provides inflation-adjusted income for as long as you live, but all future increases are based on your starting benefit. If you wait until your full retirement age (FRA) or later, you stand to be paid more. You might not need to start getting benefits as soon as you retire. If you choose to stop working at 62, that doesn’t mean you’ll have to start getting Social Security at 62. You will get a larger monthly payment by waiting until you are older before you collect. You can also use strategies for married couples to get more out of your joint benefits. Working together to create a plan will help you get more money though time. Married couples who choose wisely about how and when to collect benefits may jointly receive many thousands more than those who collect early. You can use a Social Security calculator to figure out your best options. If you have enough saved, you may want to think about using your savings to cover expenses for a while after you retire. That will allow you to delay the start date of your Social Security. Doing so can lock in a higher income amount later, which will help protect you from outliving your money.
Consider Part-Time Work
If you’re ready to retire, you may have been paring down your monthly expenses already. You might also think about boosting your earnings with a part-time job, which can help you put off taking your Social Security payments. If you were born in 1943 or later, you get an 8% increase for each year that you delay. You can also use your income to build up your 401(k) or IRA.
Medicare Doesn’t Kick in Until 65
Medicare benefits don’t start until you turn 65. If you retire at 62, you’ll need to make sure you can afford health insurance until age 65 when your Medicare benefits begin. (If you have a disability, you can qualify early.) With the Affordable Care Act, you are guaranteed to get coverage even if you have a pre-existing condition. You also can’t be charged more than someone who is healthier. But health insurance pricing can vary by location. Many retirees whose employers paid for their insurance get caught off guard by how expensive it can be. Also, keep in mind that Medicare does not cover all healthcare costs. Many people purchase additional health coverage to supplement their Medicare benefits. Get quotes on your health insurance costs. Build that expense into your retirement budget.
Diversify Your Portfolio
If you start to withdraw money from a tax-deferred retirement account, you might be surprised at how quickly the money seems to go. You will have to pay taxes on each and every withdrawal. Consider adding an account such as a Roth IRA, funded with after-tax dollars. That way, when you need money, you’ll be able to reduce your current tax burden by taking out some money that you already paid taxes on when you invested it.
Consolidate Retirement Accounts
If you have money in IRAs, 401(k)s, or other employer-sponsored plans, think about consolidating those plans into one account. Many people believe that their money is safer when they spread it out across many different firms, but when you use a large, well-known financial custodian, you can build a well-diversified portfolio by holding all of your investments within a single account. The underlying assets belong to you. They are not assets of the financial firm. That means you gain very little added safety by having accounts spread out across many firms. Another reason to combine your accounts is that tax rules require you to start taking distributions from your retirement accounts at a certain age. That is age 72, or 70 1/2 if you turned age 70 1/2 prior to January 1, 2020. You’ll find it much easier to follow these rules when your accounts have been consolidated. Although you are not required to take money out of your IRA until that age, it may make sense to start taking withdrawals if you need them. It depends on your marginal tax bracket and your other sources of income. To figure out whether that makes sense for you, you may wish to work with a retirement planner. Choose one who specializes in helping people decide on the most tax-efficient way to use their retirement money.
