Suze Orman emphasizes the importance of deciding when to take Social Security benefits, calling it perhaps “no decision is bigger” in retirement planning. While individuals can start receiving benefits as early as 62, Orman advises waiting to maximize monthly checks and benefit your future older self. She encourages individuals to consider what financial steps they can take now to be kind to their future selves at ages 88, 90, and 95. By delaying claiming Social Security benefits, individuals can increase their monthly payout when they do start receiving benefits.
A recent study from MassMutual found that many Americans aged 55 to 65 believe Social Security will be their largest source of income in retirement, surpassing 401(k) plans, investments, and pensions. Orman explains that for every month past age 62 that an individual delays claiming benefits, they will receive a slightly larger payout when they do start receiving benefits. For example, those born in 1960 or later, with a full retirement age of 67, would see their benefits reduced by about 30% if they start claiming at 62. This reduction means a $1,000 benefit would be reduced to $700.
While there are factors that may lead individuals to take benefits early, such as poor health or loss aversion, Orman advises taking the time to strategically plan and make a decision earlier rather than later. She stresses that delaying claiming Social Security can help individuals optimize their benefits and improve their financial outlook in retirement. Orman recommends starting planning now and making a conscious effort to avoid just starting benefits at 62 without considering the long-term implications.
For those planning to wait until their full retirement age to claim benefits, it’s important to consider other sources of income to offset the gap. This may involve extending employment into their 60s, working part-time, or tapping into retirement savings. To grow savings, individuals can consider investing in tax-advantaged accounts, contributing to their 401(k), buying shares in real estate, or working with a financial adviser to assess their financial situation and set goals for delaying Social Security benefits and managing their savings effectively.
In conclusion, Suze Orman’s advice on Social Security benefits underscores the significance of this decision in retirement planning. By strategically delaying the claim of benefits, individuals can increase their monthly payout and improve their financial prospects in the long run. Orman emphasizes the importance of starting planning early and making thoughtful decisions to ensure a secure financial future in retirement. Additionally, considering other sources of income and investing wisely can help individuals optimize their finances and achieve their retirement goals.
