While many in the United States might be tempted to start claiming your benefits the second you retire, it might be beneficial to hold off on claiming your retirement benefits for as long as possible.
By waiting until your full retirement age (FRA), you stand to benefit from a larger amount being credited. While this might not be practical for everyone, there is a method by which you can put off claiming your retirement benefits, while still receiving some form of financial assistance.
Social security bridge strategy
The social security bridge strategy involves using your 401(k) as a stopgap till the age of 70, when you’re entitled to maximum retirement payment benefit.
According to research conducted by Alica H. Munnell and Gal Wettstein from the Center for Retirement Research at Boston College, a retiree’s benefits can increase by as much 76 percent between the ages of 62 and 70.
This is because benefits climb by as much as 8 percent each year they are delayed.
“Using their 401(k) assets as a substitute for Social Security benefits when they retire – as a ‘bridge’ to delayed claiming – would allow participants, in essence, to buy a higher Social Security benefit,” Munnell and Wettstein wrote in the paper.
“The potential for enhancing annuity income through Social Security is substantial, since the majority of retirees claim before their FRA and about 95 percent claim before age 70.”
It is also important to remember that Social Security benefits are adjusted for inflation on…
