The Best Reason to Take Social Security Long Before Age 70

You'll face a basic trade-off when it comes to deciding when to take your Social Security benefit: time versus money. The later you wait -- up until age 70 -- the larger each check you receive will be, but by waiting, you'll receive fewer of those checks throughout your lifetime. That trade-off has led to lots of digital ink getting spilled debating the optimal age to claim benefits.

Much of the argument is centered on your "breakeven age," the age at which you end up with the same amount of dollars whether you collected at the earliest possible or latest possible age. While considering that age has some merit, it misses the best reason to take Social Security long before age 70. And that reason can be summed up in a simple question: What exactly are you going to do with the additional money later in life?

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How do people spend their money?

The table below shows spending patterns by age group, with a particular emphasis on healthcare-related costs. The information in it comes from spending data shared by the U.S. Bureau of Labor Statistics from the 2020 American Community Survey. It shows that in general, people's spending tends to drop as they approach and enter retirement. And in fact, backing out healthcare costs, age 75 and up tends to be the least expensive time of the typical person's life.

Data source: 2020 American Community Survey.

From a lifestyle perspective, that makes sense. When you're just starting out, you have home and family start-up costs to deal with, along with potentially things like student loans. As you progress through your child-rearing years, kids tend to cost more as they get older -- up until you send them away to college or independent life. With kids taking somewhere in the neighborhood of 20 years to raise, it's clear why families headed by people in their 40s and 50s tend to have the highest costs.

Once your kids are raised and your own college and home loans are paid off, your costs have the opportunity to drop. That's particularly true if you downsize your house and/or move out of a high-cost school district in favor of a less expensive community. As you reach retirement age, your costs of working also go away, and you might choose to spend time doing things around the house that you used to spend money to get done for you.

In addition, when you're in retirement, you might want to travel, but that travel usually winds down deeper in retirement, especially if your body starts to slow as you age. That whole combination of factors generally leads to people age 75 and up having lower total costs than any other age group, once you exclude healthcare costs.

Take your money earlier and enjoy it more

If you take your Social Security money well before age 70, you'll have that many more years -- likely prime, healthy retirement years -- to enjoy that money. That's money you can spend with your kids and grandkids, traveling the world, or otherwise doing what you please with it. In addition, should you happen to not make it past your breakeven age, taking your Social Security earlier means you've collected more than you would have by waiting until 70.

Wait until age 70, and you might get more money from Social Security over the course of your retirement, but how will you actually put that money to use? If the net result of a larger Social Security check is that Medicaid will have to pay that much less in helping you cover your nursing home costs, then are you really getting any benefit from that cash?

No matter when you take Social Security, have a plan for it

Regardless of what age you plan to take your Social Security benefit, be sure you have a plan for how it fits within your overall retirement. After all, the program is only designed to replace about 40% of a retiree's pre-retirement earnings. The Social Security Administration itself even indicates that you'll need more than just its benefit to have a financially comfortable retirement.

Recognizing that fact early improves your opportunity to build a sufficient nest egg to cover the costs that your Social Security benefit won't. Having that nest egg also gives you more financial flexibility to actually choose when you take your benefit, which can also make it easier to accept the lower payment that comes with claiming before age 70.

The sooner you start building that nest egg, the more straightforward it is to get it to a size where it will make a legitimate difference for your lifestyle in retirement. So get started now, and give yourself the best chance of being able to enjoy the Social Security benefit you've worked your entire career to earn.