Social Security is a primary source of retirement income for many people, and for some, it's the only source. You can begin receiving Social Security benefits at age 62, or you can delay your benefits until age 70, which will increase your monthly total. Although delaying your benefits until you reach 70 may sound like a good thing because of the increased benefits, it can also be overrated. Here's why.
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Waiting may not be worthwhile
The amount of your Social Security benefit in retirement largely depends on your retirement age. Social Security bases this benefit on your full retirement age, which can vary depending on your birth year.
| Birth Year | Full Retirement Age |
|---|---|
| 1943 to 1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 or after | 67 |
Data source: Social Security Administration.
If you retire at your full retirement age in 2022, the maximum monthly benefit is $3,345; if you retire early at 62, it's $2,364; if you delay your benefits until 70, your maximum benefit increases to $4,194. The jump in benefits by waiting until age 70 may seem significant, but it's slightly deceiving. Your checks will be larger, but you'll receive far fewer of them than you would by taking benefits early or at your full retirement age. If your full retirement age is 67, there are 60 months between 62 and 67 and 96 months between 62 and 70 -- that's a good amount of missed checks.
Let's assume you were born in 1970 and currently make $80,000. Using Social Security's benefits calculator, here's the expected monthly pay and the total amount you would have received by certain ages:
| Age You Begin Receiving Benefits | Monthly Benefit | Total Received by 80 | Total Received by 85 |
|---|---|---|---|
| 62 | $1,605 | $346,680 | $442,980 |
| 67 | $2,410 | $375,960 | $520,560 |
| 70 | $3,075 | $369,000 | $553,500 |
Data source: Social Security Administration
Using these figures, you can see that by age 80, delaying your benefits until 70 would have resulted in less overall benefits than had you started at 70. By age 85, the total benefits may be more, but there's no way of knowing if someone will live long enough for the trade-off to make sense.
Getting the most out of your retirement
Another key aspect here is being able to get the most out of your retirement. You have no way of knowing when you'll pass away, so delaying benefits for years can impact your quality of life in your early retirement years. Some new retirees may want to travel and embrace new passions and hobbies, and doing so will inevitably cost money.
Instead of pushing back Social Security benefits until 70, many will find it more rewarding to receive their benefits early -- even with the lower monthly payout -- so they can have money to take on these newfound ventures and passions. You've worked hard and paid Social Security taxes your whole career; give yourself a chance to reap those benefits as soon as you can.
