I’m a Wealthy Retiree: 6 Reasons Taking Social Security at Age 70 Was Right for Me
Written by
Laura Beck
Edited by
Chris Cluff
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For most folks, the biggest decision around Social Security is when to start claiming those benefits. Take them at the earliest possible age of 62 or wait it out for a bigger monthly check? There’s no one-size-fits-all answer, but for Gary F. from Seattle, holding off until age 70 was the moneyball move.
The wealthy retiree spent decades growing a successful career and investment portfolio. So putting those Social Security credits on ice until they maxed out paid off in a major way. Here are six reasons Gary’s glad he took the patient approach.
Also see seven ways wealthy retirees spend their Social Security checks.
Monthly Checks Are Higher
The first and most obvious perk of delaying until age 70? Getting the maximum possible Social Security payment each month.
“My monthly Social Security checks are much higher than what I would have gotten starting at age 62,” Gary said. “The difference is about $1,900 more per month, I believe.”
With retirees needing to stretch their income over decades, that extra $1,900 in monthly pension can make a huge difference in overall retirement income and lifestyle. Multiplied out over 25 to 30 years, it’s an extra half million or so in Gary’s pocket.
No More ‘Earnings Test’ Worries
Gary was also able to completely avoid the pesky “earnings test” limits that applied to his situation had he filed before age 66. The earnings test can cause Social Security benefits to be reduced or temporarily forfeited for retirees who are still earning other income.
“In my 60s, I was still earning sizeable income from doing some private consulting work,” Gary said. “If I had taken Social Security early, I would’ve temporarily lost some of those benefits until hitting the full retirement age.”
Portfolio Was Able To Grow Longer
Since he held off on taking Social Security for maximum compounding, Gary was able to leave his retirement investment accounts completely untapped for almost a decade longer. This gave his portfolio far more time and potential for growth.
“Not having to live off my investment accounts from ages 62 to 70 allowed that money to keep growing tax-deferred,” he said. “That extra compounding boosted my portfolio value tremendously when I did eventually need to start withdrawing.”
The extra growth Gary achieved is now helping stretch his retirement income even further.
Delayed Credits Lock In Higher Survivor Benefits
As someone who was the higher-earner in his marriage, Gary knows the importance of making sure his wife is taken care of if he passes away first. Delaying Social Security helped maximize her potential survivor benefits.
“By waiting until 70 to claim the highest possible personal benefit amount, I also locked in the highest possible survivor benefit for my wife if something happens to me,” he said. “That security blanket is priceless.”
Tax Flexibility in Early Retirement Years
Another advantage of holding out on those Social Security checks? Gary was able to be highly strategic about how he sourced income in his early retirement years before hitting 70.
“I was able to draw money from tax-advantaged accounts first without having Social Security get tacked onto my income,” he said. “It gave me more control over my taxes.”
Factoring In Longevity
Finally, Gary noticed something about his family that influenced his decision: In general, the male members amongst them routinely live into their late 80s and 90s. He knew the higher age 70 benefit could really pay off over a longer retirement time horizon.
“If I make it to a life expectancy of 90 years old, I’ll have collected much more money by just doing the age 70 calculation,” Gary said. “I coudn’t pass it up. Now all I have to do is knock on wood!”
Tips for When To Take Social Security
Gary’s situation of delaying until age 70 worked out great, but there’s no one-size-fits-all answer for when to claim Social Security. Here are some tips for choosing the right age:
• Consider Longevity. The (sometimes) grim truth is: Some of us come from families that live longer than others. If this is the case with your family, you might factor it into your decision. You can also consider your lifestyle and general health when making the decision, too.
• Factor in Tax Situation. Social Security benefits are subject to federal income tax above certain income thresholds. Delaying may allow you to have better control of your benefits and optimize withdrawal strategies across retirement accounts.
• Look at Spousal or Survivor Benefits. Don’t forget about maximizing potential survivor benefits for a lower-earning spouse. Delaying allows the higher-earner to lock in a higher base amount if they were to pass away first.
• Consider Working Situation. If you plan to work into your 60s and earn above the retirement earnings limits, you may be better off delaying to receive your full benefits without being impacted by the earnings test.
• Analyze Cash Flow Needs. Look at what you have, realistically. If you’re in need of cash now, claiming benefits earlier might be the right choice. If you can wait longer, then you probably should. It’s all up to your individual needs.
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