Investments Should Be Less Risky
If you are going to retire at 70 and need income from your savings and investments, you will need to learn which of them can bring you the amount of income you need. It is not the time to take risks. You need this money to last the rest of your life.
One option is to use safe investments, which may only pay a modest income, but your principal amount will be safe. For instance, you could use a bond ladder. A bond ladder is where you purchase bonds with staggered maturity dates across a certain time, like a ladder. You would withdraw the funds when a bond matures so that you will have income from the bond.
You could also build a portfolio by going by a set of withdrawal-rate rules. One is the 4% rule, which allows you to take out 4% of your starting balance each year for income. The thought behind the rule is that by taking out only 4% each year and investing the rest of your savings, you won’t run out of money when you retire.
You may want to seek out the services of a retirement planner to help you figure out what is best for you.
If You Were Born Between 1943 And 1954 Your Full Retirement Age Is 66
If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.
The chart below explains how delayed retirement affects your benefit. The increase is based on your date of birth and the number of months you delay the start of your retirement benefits. If you start receiving retirement benefits at age:
- 67, you’ll get 108 percent of the monthly benefit because you delayed getting benefits for 12 months.
- 70, you’ll get 132 percent of the monthly benefit because you delayed getting benefits for 48 months.
When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.
Can My Social Security Benefit Grow If I Work Past Age 70
The Cast of Grace and Frankie are past the age of 70, which means they are all collecting Social … Security. LOS ANGELES, CA – JUNE 02: Actors Martin Sheen, Sam Waterson, Lily Tomlin and Jane Fonda attend #NETFLIXFYSEE Event For ‘Grace and Frankie’ at Netflix FYSEE at Raleigh Studios on June 2, 2018 in Los Angeles, California.
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Social Security benefits are a major part of many American retirement incomes. As people are living longer, many more are working past the age of 70. If this is you, or maybe you in the future, you are likely wondering if working past the age of 70 will increase your Social Security benefits.
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Additional Factors In The Mix
Generally, you should consider a number of factors when you’re deciding when to claim benefits, such as the other sources of income you have to meet your spending needs.
If you retire at, say, age 67, you need to have other resources that can meet your needs and whether or not youre receiving Medicare benefits, said Colleen Carcone, director of wealth planning strategies at TIAA.
If you decide to delay your retirement and claim Social Security when youre older than 65, be sure to consider filing for Medicare in a timely manner or you may be subject to late-filing penalties.
Heres Why You Should Retire At Age 69
When we discuss Social Security claims, you can choose to retire at many different ages. 62 years of age is the earliest time for a worker to retire and receive benefits. Age 70, however, is the oldest you can be to wait on collecting Social Security benefits. Now ages 66 to 67 are in the equations as well considering thats full retirement age for those born in 1943 or later, respectively.
Actually, of all the ages that qualify you for Social Security benefit, age 69 isnt exactly the most common choice, but its a choice regardless.
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Can Your Social Security Benefits Increase Past Age 70
You are required to begin taking Social Security benefits by the age of 70. There would be no increase in benefits for trying to delay benefits beyond this age. However, you could increase your benefits if you continue working past the age of 70. There is no age or time that your Social Security income is frozen.
You will continue to pay into Social Security if you are working in a job that requires Social Security withholdings. Your earnings later in life could help cancel out a year where you didnt earn much, thereby increasing the years of your work history used to calculate your Social Security benefits.
Average Social Security Check By Type
While most people think of Social Security as a program just for retirees, it serves many other groups, including the disabled, spouses and minor children of retirees as well as the spouses and minor children of deceased workers. The amount that each group receives differs substantially.
In fact, the average retired worker receives $1,676.53 each month about 8 percent more than Social Security recipients as a whole. Heres how the figures break down by recipient, as of October 2022.
| Type of beneficiary |
|---|
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You’ll Have A Shorter Retirement To Fund
Working into your 70s will allow you to accumulate more savings for when you do retire, but more so than that, it’ll also reduce the number of retirement years you’ll have to fund. If you retire at age 65 but live until 90, that’s 25 years of living expenses for your savings to cover. But if you retire 10 years later, you’ll only need to worry about 15 years of expenses. Plus, if you have a shorter retirement, you might enjoy it more because you’ll have extra money on hand to pay for the things you enjoy.
But here are the cons:
Continuing To Work Past Your Fra Could Increase Your Benefitsdepending
So will your monthly benefit go up if you continue to have earned income? That might be the case if your current salary is higher than one of your 35 highest-earning years to date. Here are a couple of examples.
First, let’s say that you earned the maximum taxable income each of those 35 years. If so, you’re already entitled to the maximum benefit. So while there may be a lot of other positive reasons for continuing to work, it won’t get you a higher monthly Social Security payment.
But now let’s say you earned less in the early part of your career and earnings in one or more of those years were lower than the maximum annual taxable income. If what you’re earning now is higher than what you earned in one of your past 35 highest-earning years that have been indexed for wage inflation, your current higher income will replace one of the lower-earning years.
Since Social Security benefits are recalculated yearly, this added income could result in a higher monthly payment. But because there are 35 years of income included in the calculation to determine income over your remaining life expectancy from Social Security, you may not see much of a difference in your monthly payment. Fortunately, Social Security payments are adjusted for inflation, so every little increase can add up over time.
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You’ll Have A Shorter Retirement To Finance
The Social Security Administration estimates that the average 65-year-old man today can expect to live until 84.3, while the average 65-year-old woman can expect to live until 86.6. And these are just averages. About 25% of today’s 65-year-olds will live past 90, while 10% will live past 95. What this means is that you could potentially have a very long retirement ahead of you, in which case, working longer won’t just help you save more money — it will also reduce the number of years your savings will need to fund.
Not only that, but the longer you keep your savings untouched, the more opportunity you’ll give that money to grow. Imagine that, by age 67, you have $500,000 in retirement savings that earns you a conservative 4% average annual return. If you leave that money alone for an extra three years, you’ll earn an additional $62,000, which will no doubt come in handy once you stop working.
If You’re Planning To Collect Social Security At Age 70 This Year Then This Is The Most You Can Collect In Monthly Benefits
There’s no perfect age to begin collecting Social Security, but many people are waiting until age 70 because of benefit-boosting, delayed retirement credits. If you’re filing for Social Security at age 70 this year, then those credits are going to result in a monthly Social Security payment that’s a lot bigger than if you filed when you were younger.
How much bigger? The maximum Social Security benefit at age 62 is $2,324 in 2021 but swells to $3,895 per month if you’re retiring at age 70 this year. That’s 67.5% more in monthly retirement income.
Granted, not many people qualify for the maximum Social Security amount. Social Security benefits are based on pre-retirement income, and qualifying for the biggest payment requires a 35-year track record of income above the annual payroll tax limit, which is $142,800 in 2021. Nevertheless, delayed retirement credits increase benefits by a fixed percentage for each month you delay, so you’ll still pocket considerably more income by delaying than you will if you claim early.
Image source: Getty Images.
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You’ll Get To Save More Money
It stands to reason that the more time you spend in the workforce, the more opportunity you have to save. But working until 70 may be more advantageous than you realize. Boston College’s Center for Retirement Research reports that, among workers who are willing to delay retirement until age 70, 86% can expect to enjoy a financially comfortable retirement.
Your mid-to-late 60s also offer a unique savings opportunity for a number of reasons. For one thing, you’re probably earning more than you did in the past, only instead of having college to save for, a mortgage to pay, and children to support, you’re probably past all that at this point — which means you can put even more cash into a retirement account.
Furthermore, because workers 50 and over are allowed to make catch-up contributions to tax-advantaged retirement accounts, you can sock away a nice chunk of money while lowering your taxes at a time when your earnings are likely to be high. Specifically, you can put up to $6,500 into an IRA and $24,000 into a 401. If your employer offers any type of matching incentive and you contribute enough to take advantage, you’ll have even more free money coming your way.
Retiring At Age 65 Or Earlier
The original rules surrounding Social Security benefits established age 65 as the retirement age when workers could receive unreduced retirement benefits. In 2022, the Social Security full retirement age is 66 for those born between 1943 and 1959, and 67 for anyone born in 1960 or later.
An individual’s retirement savings, health benefits, and social security commonly dictate the best time to stop working and vary by age.
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Us Retirees Aren’t Waiting Till Age 70 To Collect Social Security
- Publish date: Sep 20, 2022 12:01 PM EDT
The U.S. government is not hiding the fact that the longer you wait to collect Social Security, the more money you collect. In fact, the concept is fairly straightforward.
Heres the deal, straight from the U.S. Social Security Administration.
If you start receiving retirement benefits at age . . .
- 67, you’ll get 108% of the monthly benefit because you delayed getting benefits for 12 months.
- 70, you’ll get 132% of the monthly benefit because you delayed getting benefits for 48 months.
Turning down that windfall seems contrary to income accumulation in retirement, an issue thats usually near and dear to a retirees heart.
Yet thats what Americans routinely do. Only 5% of U.S. male retirees and 7% of female retirees start taking Social Security at age 70, when benefits are at their highest, the SSA reported.
The SSA also notes that about half of all retirees take Social security benefits before full retirement age and a quarter take their benefits at the trigger date of age 62, when withdrawal amounts are significantly less than at age 67 or 70.
Social Security Benefits Are Based On Your 35 Highest
The actual calculation to determine your Social Security monthly benefit is rather complex, but basically it’s determined by your 35 highest-earning years, adjusted for inflationup to the maximum taxable amount each year.
This ends up putting a cap on the maximum monthly benefit anyone can receive. The monthly max at FRA in 2022 is $3,345. Then, of course, if you wait to collect beyond your FRA, you earn delayed retirement credits, up to age 70, which will increase your monthly payment.
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Life Expectancy Is A Crucial Factor
When it comes to retirement and collecting social security, one of the biggest factors in planning for both is life expectancy. On average, a person who lives to the age of 65 can expect to live another 19 years. This means that your social security benefit at 70 is more than 75% higher than your benefit at 62. Plus, if you are married, the lower social security payment will go away when your spouse passes away. If the spouse with the greater Social Security wage history was longer, as long as possible until the retirement age of 70, for the benefits, then they will leave behind a bigger benefit for the surviving spouse.
Many baby boomers wont have an employee pension to count on, so maximizing Social Securitys reliable income stream.
Use The State Income Tax Filter If You Qualify
While it depends on the state where you live and file your taxes, some states that impose a state income tax provide more favorable tax treatment to individuals who make contributions to and take distributions from IRAs and other qualified plans.
In Illinois, for example, the government doesnt add your 401 contributions back into your state income calculation. It also allows residents to subtract most distributions from IRAs and qualified plans from their taxable income.
If your combined income is $25,000 to $34,000or $32,000 to $44,000 if youre married filing jointlyup to 50% of your Social Security benefits may be taxed. If your combined income is more than $34,000 , then up to 85% of your benefits may be taxed.
State tax filter loopholes exist because states want to encourage their residents to stay and not jump ship for no-income-tax states like Florida or Texas when they retire. That said, the loophole can be a noose if you work in a state like Pennsylvania and then retire to a state like California.
In that situation, you can get taxed on the way in and the way out. How you incorporate these existing loopholes into your savings strategy will depend on your goals and your particular set of circumstances, including your CPAs advice.
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Claiming Social Security Benefits At Age 70
If you are about to turn 70, congratulations on reaching a big milestone. And if you also have delayed claiming Social Security retirement benefits up till now, you are joining a select group — only 6.5 percent of Social Security recipients put off collecting their benefits until they reach three score and ten, the age at which they can collect the maximum benefit. If you are about to join this elite group of septuagenarian claimers, its important to know when and how to claim.
The decision of how long to wait to claim Social Security benefits depends on a number of factors, including other income sources in retirement and projected longevity. But Social Security experts advise waiting as long as possible to start collecting benefits, up to age 70. This is because if you delay taking retirement beyond your full retirement age , you amass delayed retirement credits that increase your benefit by 8 percent for every year that you wait, over and above annual inflation adjustments. Your checks will be about 76 percent more than had you claimed at age 62, the earliest you can file. Its tough to find a better and more reliable investment than that.
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Dont Wait Any Longer
What If Youre Still Working?
For an article in The New York Times on determining the optimal time to claim Social Security benefits and ways to maximize benefits, .
For the SSA’s Retirement Benefits page, .
For more about Social Security, .
Medicare And Health Benefits
Retiring at age 65 allows individuals to be eligible for Medicare, otherwise early retirees will need to budget for out-of-pocket costs to purchase health insurance.
An individual applying for health insurance that complies with the Affordable Care Act pays an average of $456 per month in premiums. By contrast, in 2022, the standard Medicare Part B premium is $170.10 per month and it gets you coverage with a relatively low deductible of $233 a year.
To be well protected, consider prescription drug coverage and perhaps Medigapor Medicare Advantage. Prescription drug coverage premiums average $33 a month in 2022. Medicare Advantage premiums average $19 a month in 2022.
Medigap is private insurance designed to supplement traditional Medicare and prescription drug coverage. Note that if you don’t sign up for prescription drug coverage when retiring at age 65 along with Medicare, you can pay a higher penalty rate for it when you do sign up for the rest of your lifeunless you are covered by an employer drug plan.
Financial experts recommend that your retirement income should be about 80% of your final pre-retirement annual earnings.
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