Many seniors enroll for social security benefits as soon as they are eligible to do so, at age 62, in order to help supplement their retirement income. While claiming social security benefits right away does help cover immediate costs, there are significant benefits in waiting to enroll. In fact, waiting to claim social security benefits until later in retirement can result in higher benefits throughout the beneficiary’s lifetime.
In an effort to conserve the social security fund, the Social Security administration penalizes individuals who enroll at age 62. Those who enroll at 62 only receive 75% of the payment they would otherwise receive if they waited until their full retirement age. In contrast, those who wait until age 70 to enroll are rewarded with a 32% increase in the total monthly payment they qualify for at their full retirement age.1,2 Today, the average monthly social security check is $1,404.3 If an individual was eligible to receive the average monthly payment amount at their full retirement age but they enrolled at age 62, they would only receive $1,053 per month. However, if that same individual waited until turning 70 to claim their benefits, they would receive $1,853 per month. Assuming this individual lives until they are 85, they will receive $42,912 more from social security by the time they reach 85 if they enroll for benefits at the age of 70 instead of 62.
While delaying enrolling for social security payments does result in a higher lifetime benefits, most seniors cannot afford to do so. The average person between the age of 62 and 64 gets nearly 40% of their retirement benefits from social security while those over 65 get 84% of their retirement benefits from social security.5 With such a large portion of retirement income coming from social security benefits, it is not surprising that many people cannot afford to delay enrolling even if they are penalized. One solution to this problem may be for seniors to use their home equity to cover their living expenses while waiting to enroll for social security benefits.
Homeowners age 62 or over can apply for a reverse mortgage, a loan that allows them access a portion of their home equity while staying in their home and maintaining the title.4 The loan works by allowing seniors to borrow against the value of their home and defer mortgage payments until after the last remaining occupant has moved out or passed away. The loan cannot be outlived and there will be no burden to the borrower’s heirs or state. Borrowers can set up their loan payment in the form of monthly checks that will supplement their income until they turn 70. By using a reverse mortgage to fund a social security delay, seniors can maximize their social security benefits by living off of their home equity until they are eligible to receive the 32% increase in their monthly social security check at age 70.1
To learn more about how a reverse mortgage may help you maximize your social security benefits, request a free eligibility assessment by contacting a licensed loan advisor at 1 (800)976-6211 or click here to request a call back.
1 Applies to individuals born between 1943 and 1954 with a Full Retirement Age of 66.
2 Bank of America Merrill Edge, Q&A When Should You Begin Drawing Social Security? https://www.merrilledge.com/article/when-to-draw-social-security
3 U.S.News. Social Security Changes Coming in 2018.
4 You will retain the title and ownership during the life of the loan, and you can sell your home at any time (at which time the loan becomes due). The loan will not become due and subject to repayment as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes and homeowners insurance. Failing to meet these requirements can trigger a loan default that may result in foreclosure.
5 Social Security Administration. Research, Statistics, & Policy Analysis. Income Sources Table 2.A1 https://www.ssa.gov/policy/docs/statcomps/income_pop55/index.html