Should you access Social Security benefits as soon as possible or wait to try and maximize your monthly benefit? Everyone's situation is slightly different, but there are some really compelling reasons to delay drawing on your benefits.
Let's take a look at the top three reasons to delay receiving your Social Security benefits until age 70.
1. You have a high life expectancy
Your life expectancy has a huge implication for this decision. The two main components to consider are:
- Your current health status.
- Your family longevity.
If you are in great health and your family has a history of living well into their 80s or 90s then it likely makes sense to maximize your monthly benefits by waiting until age 70 to claim Social Security.
The average break-even point for waiting until 70 to receive benefits is 81 years of age (assuming a full retirement age of 67). The break-even point is the age you'll need to live so that waiting is worth it.
In other words, as long as you anticipate you'll live past age 81, you'll receive more in total benefits. The bigger but fewer checks will outweigh the smaller but more checks you'd receive if you claimed earlier.
This is also significant because your healthcare costs after age 80 will likely be higher, so the extra income could make a big difference.
2. You plan to keep working
Many Americans plan to keep working past typical retirement age. A 2021 survey conducted by Cision found that nearly 33% of American seniors plan to keep working well into their 70s.
As life expectancies continue to rise, it's likely that many more Americans plan to work throughout their 60s. In this case, it makes a lot of sense to delay taking Social Security benefits until 70 because your benefits could be penalized by continuing to work.
If you are below full retirement age, the Social Security Administration deducts $1 for every $2 of annual income you make over $19,560. The threshold is $51,960 if you reach full retirement age in that year, and the deduction is $1 for every $3 of earnings. Additionally, you could pay higher taxes on your Social Security benefits since your provisional income will be higher while you're still working.
While there are times it might make sense to take Social Security while you're still employed, generally speaking, you're better off waiting until you're fully retired or at the very least making less than $19,560 to claim your benefits.
3. You don't need the extra income
In my opinion, the No. 1 reason to take Social Security benefits early is because you need the income. But if you do not need the extra income to continue living comfortably, it's probably best to delay taking your benefits.
If you planned adequately for retirement, you'll likely have enough in monthly income from your retirement accounts like your 401(k), pension, or Roth IRA to cover your expenses and desired lifestyle.
If this is the case, you should almost certainly wait until age 70 to maximize your monthly benefits (assuming you have a long life expectancy). After all, you could receive nearly 60% more cash monthly by waiting (Assuming the full retirement age is $1,500, the benefit at age 62 would be 30% less or $1,050. The benefit at 70 would be 120% or $1,800, so $1,050/$1,800 = 58%).
As your life slows down, this extra monthly income will provide a security blanket and peace of mind so you can focus on spending time doing the things that are most important to you, instead of stressing about finances.