Despite their best efforts, many people find it difficult to save enough money for retirement on Social Security.
At full retirement age (FRA), you are now entitled to your full monthly Social Security benefit based on your earnings history. This age is 67 if you were born after 1960. However, if you delay filing for Social Security past your FRA, your benefits will increase by 8% per year until you reach age 70.
Working Past Age 70 Delays Social Security
This does not imply that you must apply for Social Security at age 70. Rather, it is because there is no financial incentive to file after that date. And if your FRA is 67 and you begin receiving benefits at age 70, you can increase your monthly Social Security income by 24% for the rest of your life.
If the prospect of receiving a larger Social Security payment appeals to you, you may wish to file for benefits around your 70th birthday. Theoretically, this is an excellent plan. Here’s why it could potentially backfire on you.
To be eligible for Social Security at age 70, many individuals must work until that age. If you are in this position due to a lack of retirement savings, you might say to yourself, “Okay, I guess I’ll be working until my 70th birthday.”
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Financially Secure Retirement Savings Strategies
You can never predict when a recession will hit the economy, causing a widespread decline in your industry. If this occurs, you could find yourself unemployed in your mid-to late-60s and unable to find another position.
In addition, there is no assurance that you will be healthy enough to work until age 70. What if mobility difficulties emerge? What if your general health begins to deteriorate, rendering a 40-hour workweek impossible?
What if you manage to maintain perfect health, but your spouse ends up requiring your full-time care? This could make it difficult or impossible to maintain employment.
Therefore, you should not assume that filing for Social Security at age 70 is a given, even if you intend to do so. You should instead make every effort to increase your retirement savings so that if you are forced to claim Social Security at an earlier age, it won’t be financially detrimental.
If you are currently saving $300 per month for retirement, consider increasing it to $350 per month for the next year, and then to $400 per month thereafter. You may not be able to contribute the maximum to your IRA or 401(k) over the years.
However, you should take precautions so that if your plan to claim Social Security at age 70 fails, you won’t be forced to struggle.
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