The Social Security retirement benefit is not only a keystone source of income for nearly all retired Americans, it's also a pretty flexible one. While "Full Retirement Age" is 66 for people retiring in 2016, meaning that is the age you would receive your full monthly benefit, you can actually begin taking Social Security retirement as early as age 62, or delay it to age 70. The key difference is, the earlier you file, the smaller your check will be, while the longer you wait to file, the bigger it will be.
But for many -- maybe most -- Americans, waiting as long as possible to file is probably the best move, and for three very important reasons. Here's a closer look at what they are. If these things sound familiar to you, then waiting to age 70 to file for Social Security -- even if it means delaying retirement altogether -- may be the right move for you.
You don't have enough retirement savings
According to a recent study by the U.S. Government Accountability Office, the median retirement savings for Americans aged 65-74 was $148,000. Based on the 4% retirement savings withdrawal rule, that would only generate about $5,920 per year in sustainable retirement income -- or less than $500 per month. Furthermore, today's low interest rate environment could make 4% distributions unsustainable, leading to even faster depletion of retirement savings.
But by delaying retirement and Social Security until age 70, you'd be able to continue contributing to your retirement savings, building up a larger nest egg, while also benefiting from the roughly 8% increase in your Social Security benefit for every year you delay filing, until it maxes out at age 70.
You're not prepared for long-term care costs
According to the Department of Health and Human Services, 70% of people who live past 65 will need some form of long-term care, and there's a 90% likelihood that if you're married, either you or your spouse will have this need. And while medical care, such as a medically necessary stay in a rehab facility, is often covered by health insurance or Medicare, you may be out of luck -- or at least out of pocket -- once you have medically recovered, even if you still need assistance with common daily activities, such as bathing, preparing meals, or cleaning.
The sad reality is, most people aren't prepared, with less than one-third of people over 50 having even begun saving for long-term care. The out-of-pocket costs can be significant, too. Even short-term, in-home, unskilled care for a few hours per day can easily cost thousands of dollars per month.
If you're in the majority of older Americans who haven't taken any steps to prepare for this potential expense, delaying Social Security can help in the same way that it would if you're also behind on your retirement savings. Delaying retirement a few extra years will help you grow a larger nest egg to help pay for unexpected expenses including uncovered care costs, and a bigger monthly Social Security benefit will further reduce the amount you need from your retirement savings for regular expenses.
You can't plan on dying on schedule
According to the Social Security Administration's latest data, a 65 year-old man today, on average, will live past age 84, while a woman who turns 65 today will live to almost 87. And if your retirement savings balances look similar to the averages discussed above, taking Social Security earlier could be setting yourself up for a struggle later in life. You'd have to count more heavily on your retirement savings to make up for the smaller monthly benefit from Social Security.
But by putting off Social Security until age 70, you'd have longer to contribute to growing your retirement savings, meaning a bigger nest egg when you do retire. At the same time, that nest egg would stretch further, since the bigger monthly Social Security benefit would reduce how much of your retirement savings you needed to cover your living expenses.