More than 3 million Americans will turn 67 this year, and a lot of them are planning to start getting Social Security. But at the same time, 67 may not be the right age to start getting Social Security, for a variety of reasons. Here's a closer look at three reasons that really stand out.
1. Holding out for a bigger monthly benefit you won't live to enjoy
With so much talk about the average American living a longer and more active life, it might seem to make sense to file at 67, which is one year beyond the current "full retirement age" for people who turn 66 this year. By waiting one year past your full retirement age, your monthly benefit will be 8% higher, which is nice, but it's only worth putting off your monthly benefit, if you're highly likely to live longer than the average American.
Unfortunately, if you're not likely to live longer than average, you'll end up getting less money over your lifetime.
Social Security's actuaries have done a good job setting up the system so that you'll get about the same total dollars, assuming an average life expectancy, no matter what age between 62 and 70 you start getting paid. The only time the higher monthly benefit will net you more money in total is if you outlive the averages and get well into your mid- or late 80s.
So if your medical history, family life expectancy, and overall health indicate you're likely to die before about 78, then it's probably a bad decision to hold out until 67 solely for a bigger monthly benefit, versus taking your benefit earlier.
2. You're long-lived with a small nest egg
On the other side of the coin, if your family history, personal health, and medical history indicate that you have a very good chance at living longer, you may want to put off claiming your benefit. This is essentially only true if you're in good health today and able to continue working to 70, and haven't necessarily saved up as much for retirement as you should have.
By putting off retirement to 70, you'll get a 32% bigger monthly Social Security check than at 67, and you'll also have time to save more of your salary for retirement.
Frankly, this isn't the right strategy for most people, who simply won't live long enough to benefit. But if you're likely to live longer -- especially if you haven't saved enough for retirement -- it could be an awful mistake to take your benefit at 67 when you should put it off till 70.
3. If you don't need the money yet
I get it -- it's your benefit, and you're ready to claim it now. But at the same time, if you don't need to start collecting your payments, there's little reason to start getting it just yet. After all, most people get about the same amount of total dollars, no matter when they claim.
Here's the bottom line: If the extra money today won't really improve the quality of your life, you're probably better off putting off starting your benefit until the max monthly payment at age 70. Two reasons:
First, if you do outlive the breakeven date, the larger benefit could make a big difference in the quality of your life in your later years, especially as your health and other care expenses increase, and your nest egg shrinks.
Second, consider your spouse, if they're younger than you and will claim a spousal benefit. The longer you put off taking your benefit, the higher the spousal benefit will also be. This will also be the case if your spouse outlives you, meaning they'll get the benefit of a higher monthly income even if you die earlier than anticipated.
Bottom line: If you die before the "breakeven" point where a higher payment from claiming later and more smaller payments from claiming earlier cross, you're still dead. It will no longer matter to you if you had started taking the benefit early or not, nor will it matter to your family.
You can't take it with you. So make the decision that will maximize the quality of your life. For some folks, that means a larger monthly benefit, for others, more payments are better. It's up to you to decide which makes sense for you.
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