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Ask the Expert: Should I switch to higher benefit or postpone?

I currently receive a Social Security widow’s benefit. I’ll be 70 years old this year. Must I switch to my own bigger benefit then, or can I do it at a later time if I choose? I still work, and plan to continue working for another couple of years.

It sounds as if you’re concerned your taxes will rise if you take your bigger benefit while still working. You don’t have to start collecting it at 70. But a two-year postponement may cost you more in benefits than it saves you in taxes.

There’s a good financial argument for waiting until 70 to take Social Security. After you turn 66, your postponed benefit grows 8 percent a year in delayed retirement credits — in addition to annual inflation adjustments — for up to four years. The result: At 70, you get a substantially bigger benefit for delaying. Most people can’t afford to wait that long for Social Security. But it’s an ideal strategy for someone who has a widow or widower’s benefit and work income to cover living expenses during those four years.

But your delayed retirement credits accrue only for four years. You don’t gain by additional delay. Indeed, if you delay more than six months after turning 70, you stand to lose, because Social Security only pays up to six months of retroactive benefits. If your retirement benefit is $800 bigger than your widow’s benefit, for example, and you wait until you’re 72 to switch, the delay will cost you $800 x 18 months — i.e., $14,400.

Before making a decision, ask your tax accountant to compare the potential cost of lost benefits with the additional tax you’ll pay if you switch to a higher benefit while working.

THE BOTTOM LINE There’s little reason to delay Social Security after age 70.

WEBSITES WITH MORE INFORMATION

ssa.gov/planners/retire/delayret.html

ssa.gov/planners/taxes.html

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