All I want to know is where I'm going to die, so I'll never go there.
-- Charlie Munger, Berkshire Hathaway
We all want to live long, healthy, and active retirements, but unfortunately, that's not always the case. Because the average American is healthier in their 60s than they are in their 70s, waiting until 70 to take Social Security may not be the best choice.
Why it matters when you take Social Security
Americans who qualify for Social Security can choose to take Social Security as early as age 62, but they won't receive their full retirement benefit until they reach age 65 to 67, depending on their birth year.
Americans born after 1943 reach their full retirement age between age 66 and age 67, and people born after 1960 qualify for full retirement benefits at age 67. After reaching full retirement age, choosing to delay receiving Social Security results in a bigger monthly payment.
For example, a person with a full retirement age of 67 who takes Social Security at age 62 would receive a monthly benefit that's 30% lower than it would be at age 67. Alternatively, if that person delays taking Social Security until age 70, then her payment would be equal to 124% of what she would receive at age 67.
Why sooner may be better than later
According to data from the U.S. Centers for Disease Control and Prevention, the likelihood of requiring a hospitalization, being diagnosed with heart disease, or developing cancer increases significantly as we get into our 70s and beyond.
Specifically, 9.3% of Americans between age 55 and 64 report having been hospitalized once in the preceding year, but that number jumps to 19% for those 75 and older.
Similarly, the number of visits to doctors, emergency rooms, or home visits climbs significantly in retirement, too. In 2013, 13.1% of 55 to 64 year old Americans report they didn't have to visit a doctor, head to an ER, or require home healthcare in the preceding year, but only 4.5% of people 75 or older were able to make that same claim.
The CDC also reports that the prevalence of diseases that can significantly impact financial security and quality of life in retirement increases markedly in our 70s as well. Only 15.8% of people age 55 to 64 report that they suffer from heart disease, but that number jumps to 36.3% for people over 75. Meanwhile, 9.3% of people age 55 to 64 have been diagnosed with cancer, but that number more than doubles to 21.4% for people over 75.
Overall, roughly one-third of Americans over 65 report having at least one condition that limits their ability to care for themselves, socialize, or work, and that's a big contrast to the picture often painted of retirees spending their golden years traveling the world, hiking mountains, and taking hot-air balloon rides.
Tying it together
Obviously, many retirees live long and healthy lifestyles that will allow them to fully enjoy the greater income in retirement associated with waiting until 70 to take their Social Security, but medical costs can have a big impact on a retiree's financial security, and the CDC's findings suggest that a lot of retirees will have their lifestyle dramatically affected by their health.
Most people seem to understand this point, but it can sometimes be overlooked when considering the pros and cons of taking Social Security sooner rather than later.
Certainly, creating a retirement plan that takes into consideration the type of retirement lifestyle you want, how much income you'll need to live that lifestyle, and a retirement savings strategy that will allow you to hit your targets is important because it can give you the flexibility to decide when you want to take Social Security. But that plan should also include a frank and honest discussion of your health, and if savings come up short when you retire, and Social Security is the only income that will allow you to live the retirement you hoped for, then it may make sense to claim Social Security early, rather than waiting.
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