According to the Social Security administration, the number of retirees claiming social security early had been on the decline for some time leading up to 2007. That was before the global financial crisis occurred from 2007-2009, in which the Social Security administration saw an increase in early filings for both men and women. Recessions have caused an increased number of people filing early because of financial setbacks.
The Coronavirus is a global pandemic that has caused unconscionable ripple effects through our financial and personal lives. It is anticipated that there will be another increase in early filers during this recession as well because of lost jobs and forced early retirement. However, there are a couple things that you should keep in mind before filing for your benefits.
Use Social Security as a Short-Term Loan
There were a lot of rule changes to the Social Security program in 2015, but a version of one of those rules still exists. You can start drawing your Social Security, receive it for up to 12 months, and pay it all back to receive your delayed credits as if you never started drawing. So, if you find yourself in need of some extra funds now while you might have a temporary setback, consider tapping your Social Security with the intention of paying it back in 12 months as an interest free loan! Keep in mind that you can only do this once in your lifetime.
Analyze all Resources Before Drawing
For those with additional resources from their bank deposits, investments, or other resources, you should strongly consider how much additional income you need before starting Social Security. For a lot of people, you are in a much better position if you draw on these resources while continuing to delay your Social Security benefits and receiving the guaranteed increase for the time you wait. Currently you will receive increases for delaying of 6.5% from 62 to your Full Retirement Age (FRA) and an 8.0% annual increase from your FRA to the age of 70.
Future Recession Proof with Social Security Delay
Having a larger social security benefit in the future will mean that a bigger percentage of your income will be coming from guaranteed sources of income. This means that you will rely less on your investments and savings to provide that additional retirement income for you. When the next recessions rolls around, and your portfolio suffers another setback, you will be less affected by this…and probably have less stress as well!
The information provided here is for general information only and should not be considered an individualized recommendation or personalized investment advice.
The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There can be no guarantee that strategies promoted will be successful and no guarantee of positive results.