Determining when to claim Social Security can be challenging for retirement-age Americans. Although it’s possible to claim benefits at 62, that move can leave many shortchanging themselves.
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In a recent article for The Street, personal finance guru Suze Orman shared why Americans should delay benefits as long as possible.
Here are four reasons Orman gives to delay claiming Social Security benefits.
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You Receive Less Money
It’s possible to claim Social Security benefits as early as 62. Unfortunately, for people born in 1960 and later, that will reduce benefits by approximately 30%, according to the Social Security Administration (SSA). This shortage will add up over time.
Even slightly delaying taking benefits can be advantageous. “Every month past age 62, you don’t claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit. Over time, those small incremental increases add up,” said Orman in a recent blog post on her website. Such reduced benefits could have significant ramifications for the 67% of seniors who depend on Social Security benefits for over half of their income.
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It Can Limit Earning Opportunities
Some retirees may choose or need to work part-time to supplement benefits received in retirement. Taking benefits before reaching full retirement age can have negative effects.
For example, Americans receiving payments will have $1 deducted for every $2 they earn over their annual limit. Waiting until full retirement age improves that to $1 for every $3 earned over the limit. Those limits, for 2025, are $23,400 and $62,160, respectively, according to the SSA.
“From a financial standpoint, if you do live a long life, waiting as long as possible to start collecting Social Security will pay off with higher lifetime benefits,” said Orman.
Your COLA Has Less of an Impact
Cost-of-living adjustments (COLAs) aid retirees by allowing them to receive increased benefits and commonly occur annually. However, for Americans taking early retirement, it adds to a lower baseline, thus negatively impacting payments, according to the SSA.
Receiving the COLA may be enticing, but it’s not a reason to claim benefits early, according to Orman. “And don’t worry about missing out on the COLA if you aren’t yet claiming your Social Security benefit. The COLA is not a reason to claim early,” noted Orman on her website.
It Can Reduce Survivor Benefits
Social Security benefits can be a helpful provision in the passing of a spouse. The SSA allows surviving spouses to collect just one monthly benefit — the survivor’s benefit or the benefit of the departed spouse. If the deceased spouse took early retirement, that could adversely affect the surviving spouse.
“The smart strategy is to have the highest earner in the household wait until age 70 to start collecting Social Security. The benefit when you start at age 70 is the highest possible payout; it’s more than 75% higher than if you start at age 62. By having the highest earner wait, you are protecting the eventual surviving spouse, who will be able to keep collecting that maximum payout,” said Orman in a recent Facebook post.
If possible, delaying payments until 70 can have a measurable impact for the surviving spouse, especially if they live into their 80s or 90s.
Claiming Social Security benefits is often a personal decision. If possible, delaying payments can have a significantly positive impact that can last for years.
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Sources:
TheStreet, “Suze Orman issues warning on common Social Security mistake“
SSA, “Starting Your Retirement Benefits Early“
Suze Orman, “Navigating When to Claim Social Security“
The Senior Citizens League, “Two-Thirds of Seniors Rely on Social Security for More Than Half Their Income“
SSA, “Receiving Benefits While Working“
Suze Orman, “Social Security Updates for 2025“
Suze Orman, Facebook Post
This article originally appeared on GOBankingRates.com: Suze Orman Urges Retirees To Buck This Social Security Trend: 4 Reasons It’s So Detrimental
