For those approaching their retirement years, you are probably wondering whether or not right now is the appropriate time to start withdrawing Social Security benefits due to all that has happened as a result of COVID-19. While we know that this is an available option, we want you to know that there are other options besides claiming benefits early. Keep reading to learn why it may be best to refrain from claiming Social Security benefits early.
- Your Checks Will Be Smaller
Yes, you read that right. Claiming your benefits early might benefit you now, but your checks will end up being smaller each month the earlier you chose to claim them. In addition, if you are married, you may want to consider how this reduced benefit may also impact a survivor benefit for your spouse if you have a higher benefit (if you predecease him or her).
- 30% Cut
Right now, we know that you might be in a financially tough spot. However, it is important that you continue to delay taking out Social Security as long as you can. Your benefits can and will drop as much as 30% if you choose to withdraw early before full retirement age. If you continue to delay your benefits, your benefits will actually increase by 8% each year that you delay from full retirement age to the age of 70. Furthermore, if you are still working and claim your benefit before full retirement age, you will be subject to an earnings test which may further reduce your monthly benefit.
- Social Security Will Not Run Out
A lot of people believe that eventually, Social Security will “run out.” This is false, as Social Security will not be going bankrupt. Social Security is funded almost completely by taxes that come from payroll. As it is frightening that so many jobs have been lost as a result of the coronavirus, it is key to remember that this will pass. The markets will stabilize eventually, but do not let its current status frighten you. As states continue to reopen, many people that were furloughed as a result of the coronavirus will be returning to work. Therefore, Social Security will continue to be funded.
In the middle of a global pandemic and health crisis, it can be easy to read into headlines and believe what you see. However, it is imperative that you stay informed and knowledgeable about the future of your finances. For advice on planning for you and your family’s financial future, we would be happy to schedule a time to talk with you. We are aware that this time has placed a lot of financial anxiety and burdens on individuals and their families, and we are here to help in any way we can. Contact us here or give us a call at (301) 907-9790.