Mary Beth Franklin: Why 66 should be your new lucky number

Apr 29, 2013 @ 12:00 am

Runtime: 2:44

When it comes to maxing out Social Security benefits, it pays to wait until you reach the 'magic age' of 66.

Video Transcript

Whenever I talk to advisers and consumers, I tell them 66 is the magic age. That's the current age for full retirement benefits, but it's magic for a couple other reasons. If you wait until 66 to collect your retirement benefits, not only will you get the full amount. But if you choose to continue working, you can get social security benefits without a reduction. If you claim social security before the magic age of 66, you're going to lose some of these benefits to the earnings cap, but the real reason 66 is the magic age is you can engage in some creative filing strategies particularly married couples or divorced couples. Can do things like file and suspend or file restricted claim for spousal benefits only. But to do that, you must wait 'til 66, the magic retirement age, to first file for benefits. If you claim social security benefits early and change your mind within the first 12 months of receiving benefits, you can actually withdraw your application for benefits. You can say to the social security administration, my bad, wanna start all over again. What that entails is you would have to pay back any of the benefits you've already received, but then you can start over later at your older age at a higher amount. It's a great way to erase the mistake. What happens if you wait more than 12 months? There is a backup plan. If you are at least the magic age of 66, you can voluntarily suspend your benefits. Now, you can't pay them back like you could with the withdrawal strategy, but it means that between age 66 and 70 you would stop drawing benefits and they would grow by 8% a year up until age 70. I don't recommend this a primary strategy, but if someone has claimed early and changed their mind, it's a good way to fix an early claiming mistake. And if you do the math, if you say collected reduced benefits at 62, changed your mind at 66 and suspend those benefits for 4 years, by the time you turn the money back on at 70, you will be up to 99% of what your full retirement age benefit would have been and that be a big chunk of change going forward and keeping in mind the bigger your base benefit is, that cost of living adjustment is going to be applied to that bigger amount every year. So, it can be a great strategy for retirees who may be looking forward to a very long retirement.

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