I learned of a way to double my Social Security benefits when I retire. The problem is that I have no way of knowing whether the government will change the rules of the game on me. I know of current retirees who claimed their Social Security benefits at age 62 because they, too, were worried the system would run out of money. Another worry is that the government will significantly raise taxes on retirees who receive money from their 401(k) or IRA accounts. Any income received from Social Security could be taxed to the point of absurdity. According to a recent article by The Motley Fool, people who delay taking Social Security might be shocked by how they can literally double their Social Security benefits. A member of Generation X, I need to consider my options. The oldest members of my generation will be turning 50 soon.
Starting with $1,000
The author of the Motley Fool article compared the financial results of three different retirement ages, assuming a $1,000 payment per month at the individual’s full retirement age. According to the article, that person would have received $750 a month at age 62; the $1,000 at a full retirement age of 66 and $1,320 at age 70. Of course, the full retirement age of someone in my generation is 67. It’s likely the government will raise the full retirement age again before I retire. I might have to work to age 70 just to get my primary insurance amount.
Assuming a long life
I think too many people assume they will die young. They aren’t optimistic about their longevity because of family history. I think it’s foolish to take Social Security at age 62 unless it’s impossible to work. It’s better to assume a long life and delay taking the benefits for a higher monthly pay out. I know senior citizens who are struggling to pay their bills in their 60s because they locked in at the lowest possible payout amount for the rest of their lives.
Building up my income
One of the other ways to increase Social Security benefits is to earn more money. I checked my work history online at the official Social Security system’s website. I leaned that that my benefits are calculated using the highest 30 years of income. I don’t have to keep working until I’m 70. I just have to wait to claim my Social Security benefits until I’m 70. In my case, I will work only until I have 30 respectable years of income. Since I started working at age 16, I’ll have 30 years of income by age 46. My goal is to replace my lower income years by working a few more years.
I know some senior citizens depend on a cost-of-living adjustment to their Social Security, but that’s not a guarantee in our weak economy. Lawmakers can also change the rules about when a retiree has to take money out of a Roth IRA or other account. Looking at the chart, it seems the smartest retirees are the ones who delayed taking their Social Security even if they stopped working years earlier.
More from this contributor:
Un-Baby Boom Means Less Social Security Later
Social Security Isn’t Worth Saving
Retiring on the Purple Plan