Does It Pay to Wait Until 70 to Claim Social Security Benefits?

Vested Partners A Multi-Family Office Blog

Delaying benefits provides a bigger Social Security check. However, you have to live long enough to make it worthwhile.

There’s no lack of advice about when retirees should start claiming their Social Security benefits. Much of it repeats the adage to wait until age 70 if possible, and the reasoning’s not wrong. The longer you delay taking benefits, the higher your monthly benefits will be. The odds are good you’ll maximize your lifetime benefits, explains a recent article from The Motley Fool, “The Unfortunate Truth About Claiming Society Security at Age 70.”

However, there are some potential downsides to waiting until age 70. Waiting to take benefits until age 70 means there are 8 years of benefits you don’t receive.  The life expectancy of the average 62-year-old suggests most people live long enough to receive more in Social Security benefits by taking them at age 62 than if they waited until age 70. A 2019 study from United Income found that more retirees than not benefit from taking Social Security benefits early.

There’s no way to know if you will turn out to be an “average” 62-year-old. You may not want to wait if you have a health condition and a lowered life expectancy.

Another consideration of when to take your benefit exists if your spouse will claim their benefits on your record.  If your spouse earned far less than you, they might be able to claim a higher benefit on your earnings record than if they claim on their own. Social Security spousal benefits allow spouses to collect up to half the amount their partner will receive at their full retirement age. This could add a significant increase to your household income in retirement. However, you must be taking your Social Security benefit if your spouse is to claim on your record.  This may mean you file earlier than you otherwise would have.

Social Security spousal benefits max out at full retirement age. If you delay claiming your benefits but your spouse has already reached full retirement age and are claiming their benefits, they would be collecting a smaller benefit than they could if you were also claiming your benefit.

Another thing to consider is the effect that claiming your Social Security benefits has on your retirement savings accounts.  If you delay taking Social Security benefits, presumably you may need to pull funds from your retirement accounts to live.  You might decide to collect early instead, hoping your investments will grow faster than the Social Security increase.

Social Security offers a guaranteed inflation-adjusted increase in your monthly benefit when you delay taking benefits. Collecting earlier and keeping more money in markets is an option. However, it may not always work to your advantage. Deciding when to claim Social Security isn’t easy and requires an analysis of a multitude of factors.

Reference: The Motley Fool (Feb. 10, 2024) “The Unfortunate Truth About Claiming Society Security at Age 70”

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