What Waiting Until 67 To Claim Social Security Can Cost You If You Have Health Issues
Written by
Jennifer Taylor
Edited by
Zuri Anderson
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Delaying Social Security benefits isn’t right for everyone. If your health isn’t great, holding off on collecting your checks might not be the right move.
“Many people believe waiting until age 70 is the best option, but that’s not always the case,” said Sarah Maitre, chartered financial analyst (CFA), certified financial planner (CFP), founder and financial planner at Camriel Advisors. “It’s important to run the numbers for your specific situation, to understand what makes the most sense for you.”
She recently helped a client with an aggressive form of cancer navigate this situation. Initially, the client was set on waiting until his full retirement age to collect his benefits, but also believed his diagnosis would shorten his life expectancy.
Timing Matters More
“We ran the analysis and found that it made sense to start Social Security immediately, if he believed he would pass before the age [of] 78,” she said. “Having the break-even age was helpful for this client to make an informed decision based on his specific situation.”
Sometimes, opting to take Social Security early can also be based on non-financial reasons, said Noah Damsky, CFA, principal at Marina Wealth Advisors.
“It provides peace of mind, money in your pocket and a return on the investment of decades at work,” he said. “We like getting paid early, even if it means leaving some money on the table down the road.”
However, he noted the importance of considering the trade-offs of taking Social Security early, when longevity is a concern. He said the two most common issues are any longevity challenges you’re facing and the size of your IRA balance.
“I had a client with diabetes who knew he wasn’t going to live to the age of 80, which we estimated to be his break-even point if he waited to take Social Security,” he said. “He took Social Security early, even though he didn’t need the cash, because the likelihood of him living a long life was unlikely.”
As for the IRA balance, if yours is significant, he said to consider how you’re going to time distributions to minimize taxes.
Common Healthcare Costs in Retirement
Healthcare costs in retirement can add up fast — especially if you have health issues.
For starters, most people pay at least $202.90 per month for Medicare Part B — medical insurance — according to Medicare. Part A — hospital insurance — has a no-cost premium for most people, but there’s a $1,736 deductible each time you need to use it.
Inpatient stays of one to 60 days are free after paying your Part A deductible, but longer stays add up fast. Days 61 to 90 cost $434 per day, $868 per day for days 91 to 150 — using your lifetime reserve days — and all costs fall on you after that.
Additionally, people turning 65 years old now have a 70% chance of needing some type of long-term care in the future, according to the Administration for Community Living. This spans an average of 3.7 years for women and 2.2 years for men.
This can add up fast, no matter what level of long-term care you need. For example, an in-home non-medical caregiver costs an average of $80,080 per year, while a semi-private room in a nursing home averages $114,975 annually, according to CareScout.
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