With the average life expectancy increasing, and the costs of food and health care rising, many older Americans are facing tough choices about retirement. The solution for many is to keep working past the age they had expected to retire, in order to build retirement savings and claim a larger Social Security benefits check.
This is a great plan in most cases, but you should watch out for these late retirement pitfalls if you decide to keep working past age 65.
Social Security. If you decide to keep working past your full retirement age (age 65 to 67, depending upon your year of birth), and delay claiming Social Security, you may know that your future benefits checks can grow by about 8 percent for each year you continue to work. However, if you decide to go ahead and claim your benefits while you’re still working, and before you’ve reached full retirement age, Social Security may temporarily withhold all or part of your payments depending upon your income. In many cases it may not be ideal to claim Social Security until after full retirement age.
Medicare. Even if you’re still working and don’t need it, don’t forget to sign up for Medicare when you turn 65. You can first apply for benefits in the three months prior to your 65th birthday, and this initial enrollment period extends for four months afterward. If you wait beyond that period to sign up for Medicare, you could face a 10 percent increase in your Part B premiums for each year that you were eligible for Medicare but didn’t claim benefits.
Required minimum distributions from retirement accounts. If you haven’t begun taking required minimum distributions from your retirement accounts, you need to do so by age 70 ½. Otherwise, you will face a steep, 50 percent tax penalty. Also, you’re no longer eligible for tax deductions for making retirement account contributions beyond age 70 ½.
This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.