Not everyone waits until 70 to claim Social Security. But while some people need to access Social Security earlier than planned due to financial hardships, they may catch up while receiving government checks and find that they don’t actually need Social Security right now.
If you’ve reached full retirement age, you can stop Social Security payments now to get higher benefits later. Here’s what you need to know.
What is Social Security’s ‘pause button’?
Anyone born in 1960 or later reaches full retirement age at age 67, while people born earlier have an age of 66 and a few months, depending on when they were born. If you hit that number, Social Security gives you the option to temporarily freeze your retirement benefits. It’s different from withholding that happens if you claim Social Security early and still work full time. It’s also different from withdrawing your Social Security claim within the first 12 months and doing something else.
During this time, you will not receive government checks. However, delayed retirement credits will accumulate in your account until age 70, allowing you to secure higher benefits for life. It may make sense to hit this pause button if your income has increased and you can keep up with living expenses even if you don’t receive Social Security.
How big your checks can be
Each year you delay benefits at full retirement, your benefit increases by 8% per year plus the rate of inflation. “You can restart your payments whenever you want, or they will automatically restart at age 70,” according to the Social Security Administration.
It’s more money if you can wait that long. However, trading generates additional income. Not every Social Security recipient has the financial means to withstand the sudden lack of government checks until age 70.
This strategy may be suitable for people who are in good health and have sufficient sources of income to keep up with the cost of living. Then, you can lock in a large guaranteed monthly benefit later in retirement without disrupting your current lifestyle. A higher benefit is also important for your spouse if you are the main earner. That’s because the survivor benefit is based on the survivor’s benefit or the spouse’s benefit, whichever is higher.
Retirees need to understand
The main catch with this pause button is that you have to navigate the cost of living without Social Security benefits for as long as you want to defer them. It can come as a big shock to people who have relied on government checks for years but want to accumulate delayed retirement credits.
Family members receiving benefits on the retiree’s record generally do not receive those payments during the suspension, but divorced spouses may be treated differently. You may also have to pay Medicare Part B premiums directly to maintain your coverage.
If you return the benefits, you will not receive a lump sum. Instead, you get higher benefits for the rest of your life. It’s important to consider your financial situation, health and other factors when deciding whether hitting the pause button on Social Security benefits is the right move. Run the numbers, consider Medicare and family benefit results and contact Social Security before stopping payments.
