Kotlikoff on Social Security: If You Delay Social Security But Also Stop Working, Will Your Benefit Still Increase?

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By Laurence Kotlikoff, MaximizeMySocialSecurity

Let’s say you stop working at age 62, but decide to delay taking your Social Security benefits. Will the payment you eventually receive still increase by 8% or so for each year you postpone benefits even though you’re not working during that time?

—Linda B.

Many people have the mistaken impression that your Social Security benefits increase only if you continue working during the time you delay claiming. But that’s not the case.

Check Out: Your 3 Biggest Social Security Questions Answered

The Social Security benefit you eventually receive will increase by about 7% per year until you reach your full retirement age. If you postpone even beyond that, your benefit will increase by 8% between full retirement age and age 70. In both cases, your benefit will also be adjusted to reflect inflation.

Of course, if you also work during that time, your benefit might increase even more. For details, see Social Security’s “How Work Affects Your Benefit” guide.

Boston University economics professor Laurence Kotlikoff is an expert on Social Security. His Maximize My Social Security service can help you figure out how when and how to claim benefits to get the highest lifetime benefits, while his ESPLanner tool can help you achieve a stable living standard before and during retirement. He is a co-author of Get What’s Yours: The Secrets To Maxing Out Your Social Security.

LARRY’S ANSWER TO ANOTHER WORK-RELATED SOCIAL SECURITY QUESTION:

I plan to start taking Social Security payments at 62. If I decide to go back to work, can I stop the payments and then resume them when I’m no longer working?

—Steve

If you go back to work and earn enough to lose your retirement benefits due to the earnings test, those lost retirement benefits will be recouped in terms of a higher check after you reach full retirement age.  This is thanks to Social Security’s “Adjustment of the Reduction Factor.”

Once you reach full retirement age, you can suspend your retirement benefit and start it up again at 70 at a 32% larger value assuming your full retirement age is 66. That said, I would do whatever is possible to wait to take my retirement benefit until 70 because it will then start at a 76% higher value (after inflation).

Check Out: The Best Way To Invest For Retirement Income

I’d modify this advice if you told me that your maximum age of life is relatively low or that you have a child or spouse who could collect on your work record starting right away were you to begin taking benefits immediately. (I’m assuming you are now 62.)   [5/7/15]

Boston University economics professor Laurence Kotlikoff is an expert on Social Security. His Maximize My Social Security service can help you figure out how when and how to claim benefits to get the highest lifetime benefits, while his ESPLanner tool can help you achieve a stable living standard before and during retirement. He is a co-author of Get What’s Yours: The Secrets To Maxing Out Your Social Security.

 

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