One of the most consequential dilemmas facing retirees about Social Security is determining the right age to claim. The earlier you take your benefits, the smaller your payments, but the longer you wait, the fewer checks you collect.
Those who hold out the longest wait eight full years after they first become eligible at age 62. It’s a decision that comes with hefty risks — but potentially significant rewards.
“The decision to wait until 70 to claim Social Security is a personal one, dependent on your financial situation, health status and life expectancy,” said James Allen, certified financial education instructor, financial advisor, certified public accountant and founder of Billpin.com. “It’s not a one-size-fits-all answer, and it’s certainly not without its pros and cons.” Let’s explore those pros and cons below.
Pro: Your Payments Get Bigger the Longer You Wait
The primary reason to delay is that the Social Security Administration (SSA) offers a financial incentive to do so.
“The allure of waiting until 70 to claim Social Security is the increase in monthly benefits,” said Allen. “If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.”
That’s because the SSA pays delayed retirement credits to those who wait.
“Waiting until 70 can maximize monthly benefits, as each year you delay past your full retirement age until 70, benefits increase by about 8%,” said Amber Dixon, CEO of Elderly Guides.
Dixon’s 8% is the annual increase of delayed retirement credits, which accrue at a rate of two-thirds of 1% per month you delay for people born in 1943 or later.
“This could provide a significant boost to your retirement income, especially if you expect a long lifespan or do not have substantial savings,” said Dixon.
For example, if you were born in 1960 or later, your full retirement age is 67. If you delay three years until 70, the “significant boost” Dixon describes equals 124% of your planned benefit. It’s important to note that credits stop accruing at 70 whether you claim your benefits or not.
Pro: Waiting Can Provide a Hedge Against Inflation
You can claim as young as 62 and accrue credits up to 70, but thanks to inflation-based cost-of-living adjustments (COLAs), holding out as long as possible can provide insurance against rising prices when your nest egg thins as you age.
Con: If You Need the Money, Your Lifestyle or Finances Could Suffer
Waiting to claim provides bigger checks, but there’s also an argument for collecting smaller checks for a longer time.
“The flip side is that you’re leaving money on the table in the short term,” said Allen. “You’re betting on the long game, hoping that the increased monthly payout when you’re older will outweigh the benefits you could have received earlier. It’s a gamble, and like all gambles, it’s not without risk.”
Much of it depends on how much you have saved and the kind of lifestyle your nest egg can support while you wait.
“Deferring Social Security could also mean relying more heavily on personal savings or income from work in the early years of retirement,” said Dixon. “This could deplete savings faster or delay retirement.”
It’s never worth it if you’re forced to borrow to get by at a rate higher than the 8% annually you stand to gain by waiting.
“It might not make sense to wait if you are eligible for benefits and cannot pay your bills,” said Joe Wilson, a registered financial advisor and founder of Ten Point Financial. “Taking on debt to make ends meet or watching your current debt pile up just to get higher Social Security income is unlikely to make sense.”
Con: You Lose a Month of Time for Every Credit You Gain
Of equal importance is time — you trade a precious, non-refundable month of it for every two-thirds of a percent you gain. “Don’t put off life to wait to start Social Security just because you want a higher payment,” said Wilson.
“You may have trips you want to take, a house remodel you are dreaming of or grandkids to spoil. If the life you want needs your benefits now, I would highly encourage you to consider starting before 70,” he added. “Calculating the optimal time to pull Social Security is mostly based on life expectancy. If you have underlying health conditions or a family history of not living into your elder years, you may be better off starting before 70.”
Pro: A Surviving Spouse Could Collect Bigger Checks
As Wilson said, much of it comes down to life expectancy — and a spouse with a lower income who expects smaller payments could stand to gain by your decision to wait when the inevitable happens.
“It can make sense to wait until they are 70 to start Social Security as a surviving spouse would receive 100% of their Social Security benefits upon their death if their spouse is at full retirement age,” said Wilson. “It should be noted the spouse would forego their Social Security payment. Spouses should compare their benefits and make the best decision for their situation.”
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