Whether you’re sitting in bumper-to-bumper traffic on the freeway or killing time at the airport because of a layover, I’m sure you’ve had to remind yourself at some point that “patience is a virtue”.
Sure, this phrase applies to everyday life, but it carries over into retirement as well.
Did you know that delaying your retirement until a further date has the potential to significantly boost your Social Security payouts?
When it comes to retiring, you can effectively get paid to wait. Here’s how it all works…
Half of the population choose to jump on their Social Security benefits at the first chance they get.
And why wouldn’t you?
Once you reach 62-years-old the government deems you eligible to claim Social Security. It’s as basic as that.
Although this marks the earliest possible age to receive these retirement savings, what they don’t tell you is 62 is not considered to be the full retirement age.
But what do you care? After all, you’d already be free from work and reeling in incremental payments from these government funds, right?
That’s correct; however, if you were to hold out for another 4 years and delay your retirement from age 62 to 66, the benefits would be far more substantial.
It’s simple. The system penalizes those who cash-out early and rewards those who have the patience to wait until a bigger payout.
In case you’re curious about the magnitude of this penalty, an early withdrawal results in a 25% reduction from your Social Security.
On average, this equates to about $4,000 in annual deductions!
On the other hand, patiently waiting for your full retirement age to arrive would allow you to passively accumulate an extra 8% in benefits with each year.
If you were to work past the early retirement date and until the age of 70, these savings would total to a collective value of 64%!
Either way, some people feel they can’t afford to watch the clock tick any longer, which explains the 50-50 split between the retirees seeking instant gratification and the individuals who are willing to remain patient.
At the same time, prolonging this date is only practical until you’ve reached 70-years-old. Afterwards, there are no additional benefits to take advantage of.
Another thing to consider is Social Security is reflected by wages NOT specific prices.
Without getting bogged down with all of the details, just know that this inherently causes your retirement savings to expand over time.
For example: a median wage worker who’s on track to retiring this year would get approximately $20,000 in benefits, but if you were to fast-forward 20-years into the future this amount would climb close to $28,000.
That’s a 38% increase!
Obviously it’s not realistic to postpone claiming Social Security for such a long time, but it highlights another perk that comes along with pushing your retirement to a later date.
What’s the rush?
You’ve already managed to wait 60+ years for your retirement date to arrive. So, what’s holding you back working another few years or so?
Patience is key when it comes to making the most out of your Social Security and the numbers prove that it’s well worth the wait.