U.S. topic -- Did you know you can suspend Social Security benefits after Full Retirement Age until age 70?

[Jingthing]

I thought I knew all the angles, but I just learned this tonight.

 

Once you have reached full retirement age (which varies based on your birtdate) if you've already claimed (as early as age 62) you can choose to SUSPEND your benefits until age 70 and thus increase your benefit about 8 percent annually when you restart.

 

Can You Suspend Social Security and Restart Benefits Later? (aarp.org)

 

Some points:

 

I assume you can suspend anytime after FRA up to age 70.

 

The increased future benefits accrues monthly so even suspending for six months would get something.

 

This is only for old age type social security.

 

Of course you need to be able to afford to live without the benefits while suspended.

 

You have to consider your tax situation. Social security benefits are not fully taxes. Withdrawals from retirement accounts are.

 

You can restart the benefits before age 70 (if it turns out you need the income, etc.)

 

But I have one MAJOR question?

 

Do you still get COLAs during the suspended time?!?

 

For example if your benefit when you suspend is 1500 monthly is the increase when you restart calculated on the 1500 or does the base of the calculation INCREASE annually after each COLA?

 

It seems to me that would make a big difference on the attractiveness of this option.

 

[bluebluewater]

The COLA is applied and compounded to the delayed benefit.

[Damrongsak]

"You have to consider your tax situation. Social security benefits are not fully taxes. Withdrawals from retirement accounts are. "

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Yeah, it's kind of tricky depending on one's situation.  SS benefits can actually be cut a good bit if you "work", until you reach 70.  Not sure if retirement accounts (like 401K or IRA) are treated like working income as far as SS benefit reduction, but certainly are taxable.  In my case I'm burning some post-tax savings until I get to the point of mandatory withdrawals from my 401K.

 

Recently I heard about the "Spousal Benefit" where one's spouse in SS could get a boost in monthly income based on your benefit (assuming it's higher), maybe up to half of your's.  And they don't have to kill you!  (Death benefit gets them more, LOL) A friend's wife got boosted by maybe $1,000/month because of this. 

[Jingthing]

Non Roth IRA retirement account withdrawals are taxable income but not counted as work income as far as penalties. 

 

I don't think there is any penalty for working income after full retirement age.

 

As this topic is about suspending benefits after FRA.

 

The formula for taxing social security starts with a base of 50 percent of the benefits. So many people on social security pay no tax. But non Roth IRA withdrawals are counted 100 percent so doing a suspension might create a tax consequence based on other income to replace it.

 

 

Edited January 22, 2023 by Jingthing

[Jingthing]

1 hour ago, bluebluewater said:

The COLA is applied and compounded to the delayed benefit.

That's logical but how do you know that?

[metisdead]

A post offering unhelpful advice has been removed.

[gamb00ler]

8 hours ago, Jingthing said:

The formula for taxing social security starts with a base of 50 percent of the benefits. So many people on social security pay no tax. But non Roth IRA withdrawals are counted 100 percent so doing a suspension might create a tax consequence based on other income to replace it.

Income taxes for the retired are usually quite simple.  Taxation of SSA benefits is one of the computations that is not so simple.

 

Here's a link to a free (actually, donation ware) Excel spreadsheet:

https://sites.google.com/view/incometaxspreadsheet/home?authuser=0

 

It's configured so it looks like the blank forms you can download from IRS.

Just fill in your age, W-2's, 1099's, SSA1099 and it will calculate your tax.

 

I use it for calculating the maximum amount to withdraw from my IRA to remain in the tax bracket of my choice (0%).

 

Also here is the worksheet from IRS to compute taxation of SSA benefits:

 

SSAworksheet.pdf

[Jingthing]

28 minutes ago, gamb00ler said:

Income taxes for the retired are usually quite simple.  Taxation of SSA benefits is one of the computations that is not so simple.

 

Here's a link to a free (actually, donation ware) Excel spreadsheet:

https://sites.google.com/view/incometaxspreadsheet/home?authuser=0

 

It's configured so it looks like the blank forms you can download from IRS.

Just fill in your age, W-2's, 1099's, SSA1099 and it will calculate your tax.

 

I use it for calculating the maximum amount to withdraw from my IRA to remain in the tax bracket of my choice (0%).

 

Also here is the worksheet from IRS to compute taxation of SSA benefits:

 

SSAworksheet.pdf 126.55 kB · 0 downloads

Definitely useful for those making  or withdrawing enough to have anything taxable. For me, it is simple.

[Jingthing]

Uh oh!

 

Something I hadn't thought of that is a big deal.

 

For those of us that are enrolled in Medicare Part B now automatically deducted from social security if you suspend then you would need to pay for that directly.

 

https://www.ssa.gov/benefits/retirement/planner/suspend.html

Edited January 23, 2023 by Jingthing