Here’s what you need to know if you plan to claim Social Security benefits amid COVID-19

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn0

Published on 7/6/2020

A good chunk of an average American’s income goes towards their retirement fund. It not only guarantees a regular flow of income even after retirement, but you can also take your retirement benefits at any time after you turn 62. If there is an impending crisis in your life or a cash crunch that needs an immediate resolution, your social security retirement benefits can come to your rescue. Social security retirement benefits are the soft cushion that you can rely on in your later years.

Many eligible persons (those above the age of 62) are mulling claiming their social security retirement benefits in these circumstances.

When can I start claiming my social security retirement benefits?

Ideally, you should wait till you turn 70 to start claiming your retirement benefits as it gives you an extra 8% every year you delay the claim from your retirement age.

In other situations, waiting till your retirement age (66 or 67 depending on when you were born) might be the ideal situation to stake a claim. Sure, you can claim the benefits when you turn 62 as well, but it results in a reduction in the retirement benefits you receive for the rest of your life.

Hence, it is advised that you wait till 66 or 67 to start claiming your retirement benefits.

However, considering the unpredictability of life, there will be moments when you will need extra money to kick in-it could be due to health issues, income loss and many other factors.

With the ongoing COVID-19 crisis, the need to so has risen manifolds.

Should I claim social security retirement benefits right now?

The short answer to it would be, no.

Think of social security retirement benefits as a kind of investment you’re making for your old age when you have absolutely no means of an income. And it’s a pretty good investment which requires low input and gives high returns. There is practically no other such scheme or investment which guarantees where you can get the same amount of profits with high-risk aversion.

However, if you’ve crossed the age of 62 and have recently been laid off due to the pandemic, chances are you will claim your retirement benefits at the first go. It will be an instinctive step as well as a strategic one.

But, if you have savings to keep you afloat for a few months or have money invested which can be used right now, do it. It could be your IRA savings or 401 (k) savings. If you have invested in stocks and they are giving you a decent return in this market, use that money but don’t claim social security benefits just yet.

You might feel a little terrible about letting that chunk of invested money go, but a delayed claim on retirement benefits will heavily favour you (that is when you turn 70).

What if the retirement benefit funds are running low?

A recent report released by the Wharton School stated that the coronavirus pandemic triggered a panic move by people in their 60s to stake a claim on their social security benefits. Consequently, the funds may run out by 2032 instead of the previously quoted 2036.

Should this be a valid reason for you to claim your benefits immediately?

No.

The Social Security Admin has said that the resources will be available till 2035 and 79% of the promised benefits will be paid without any default. Hence, this should not be a game-changing decision for you to claim your benefits now.

Can I take benefits now and suspend them for later?

One of the most frequent inquiries is this- Boomers are asking if they can claim social security benefits early and then change their mind and suspend it for later.

As crazy as it sounds – yes, it is doable!

You have one year after claiming benefits to withdraw your application for social security benefits till full retirement age. However, this entire process can only be done once in your life. Additionally, all the benefits received in this tenure of one year must be paid back.

This way, you can claim early benefit in a crisis-like situation like right now and withdraw your application (within one year) when you see your financials stabilising. You get both benefits this way.

Yes, the situations right now are not in any one’s favour and seem highly unlikely. But don’t let this affect the quality of life you will lead post 70 years of age. If you can avoid early claiming of your social security retirement benefits and manage with saved up money, you should do that. Wait for social security to become ripe with benefits and then stake a claim.

Got any questions? Feel free to speak to us at C19Grants@mytaxfiler.com!

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn0