Many seniors depend on Social Security to provide the bulk of their retirement income. As such, many take steps to score as high a benefit as possible.
The monthly benefit you're entitled to during retirement is based on your wages during your 35 most highly paid years in the labor force. And you're then entitled to that benefit at full retirement age, or FRA. FRA begins at 66, 67, or somewhere in between, depending on your year of birth.
There's also the option to delay your filing past FRA. For each year you do, up until age 70, your benefit grows 8%. And to be clear, once you lock in that higher monthly benefit, it's yours to enjoy for life.
At first glance, delaying your filing may seem like a surefire way to get the most amount of money out of Social Security. But that decision could end up backfiring on you in one specific situation.
When you don't live a long life
The interesting thing about Social Security is that it's designed to pay you the same benefit regardless of if you file early, on time, or late. But that assumes you end up living an average lifespan. If you don't, and you pass away sooner than the typical senior, then delaying your filing ends up being a poor choice, as it will result in you getting a more generous monthly benefit from Social Security, but a lower lifetime benefit.
So, let's say you're looking at $1,700 a month in benefits at an FRA of 67. If you delay your filing until age 70, that benefit increases to $2,108. That's a nice bump for sure.
But what if you only end up living until age 76? At that point, you'll be looking at almost $32,000 less in lifetime income by virtue of having waited to start collecting that money.
How to know when to claim benefits
The tricky thing about signing up for Social Security is that you don't have access to a crystal ball, which means you can't predict how long you'll live. In fact, you could end up in great health in your late 60s and delay your filing as a result, only to then fall ill in your early 70s and pass away shortly thereafter.
As such, delaying your Social Security claim really is a bit of a gamble. And if you have any notable health issues going into retirement, that alone may be reason enough to sign up at FRA (or even sooner) and not hold off on filing.
On the other hand, if you have a family history of longevity, that might inspire you to delay your filing as long as possible. And that wouldn't be a poor choice at all.
Ultimately, delaying Social Security carries some degree of risk. But the upside can be substantial if you end up living a long life. And so you'll have to weigh the pros against the cons to determine if holding off on claiming benefits is a move worth making.