Suze Orman has established herself as a prominent figure in the realm of financial advice, sharing her insights through various mediums such as books, television, podcasts, and interviews. She has frequently expressed her views on Social Security, emphasizing the significance of making informed decisions concerning it.
Here is an overview of Orman’s recommendations regarding Social Security, along with some additional considerations.
A Brief Overview of Social Security
Everyone has a "full retirement age," which is the age at which they can begin collecting the full benefits they are entitled to based on their lifetime earnings. For those yet to reach this age, it will be 66 plus a few months, depending on the year of birth, or 67 for individuals born in 1960 or later.
Deciding when to start collecting benefits is a critical choice. Starting early results in smaller monthly payments but more of them over time. Alternatively, delaying benefits beyond the full retirement age allows for the accrual of delayed retirement credits, increasing monthly payments by 8% per year (or 0.66% per month). Credits can be earned until the age of 70, beyond which further delays yield no additional benefit. The table below illustrates the percentage of full benefits available at different starting ages:
| Start Collecting At: | Full Retirement Age of 66 | Full Retirement Age of 67 |
|---|---|---|
| 62 | 75% | 70% |
| 63 | 80% | 75% |
| 64 | 86.7% | 80% |
| 65 | 93.3% | 86.7% |
| 66 | 100% | 93.3% |
| 67 | 108% | 100% |
| 68 | 116% | 108% |
| 69 | 124% | 116% |
| 70 | 132% | 124% |
Orman’s Advice
Orman advocates for delaying the claiming of Social Security benefits whenever possible, especially if not dealing with a life-shortening illness. She recently posted on Facebook suggesting that women consider long-term strategies, particularly if they anticipate living alone later in life. For households relying substantially on Social Security to cover essential retirement expenses, timing when to begin receiving benefits is crucial. Orman’s strategy suggests that the highest earner in a couple should delay claiming until age 70 to maximize benefits, ensuring the surviving spouse can continue to receive a higher benefit amount.
Considerations for Social Security
Is waiting until age 70 the optimal choice for everyone? Not necessarily. Different studies present varied findings, often noting that the right choice depends on individual circumstances. Here are six factors to contemplate when considering whether postponing benefits until age 70 is advantageous:
Health: Healthy retirees are generally advised to delay benefits to capitalize on a potentially longer lifespan. However, individuals with health issues might benefit from claiming earlier.
Employment Status: For those still working, claiming Social Security before reaching the full retirement age can result in withheld benefits if earnings exceed certain thresholds. Although withheld amounts are later factored into future benefits, they are not entirely lost.
Inflation: To guard against inflation, maximizing benefits through delay can be beneficial since Social Security typically provides annual cost of living adjustments (COLAs).
Investments: Early claiming may reduce the need to access personal savings, allowing investments to continue growing, while delaying may necessitate depleting savings more rapidly.
Lifespan: A long life expectancy increases the risk of depleting finances. Delaying benefits can ensure more significant income in later years when personal savings might be lower or exhausted.
- Stability of Social Security: While not immediately threatened, Social Security faces a future shortfall. Without corrective action, it may soon only cover a percentage of due benefits, prompting some seniors to claim early to mitigate uncertainty.
In conclusion, it is important to consider Orman’s advice and evaluate whether delaying Social Security benefits aligns with individual circumstances and financial goals.
