Social Security provides tens of millions of Americans with much-needed money for living expenses. Americans with a work history can claim retirement benefits as early as age 62, so it's no wonder that few of them even consider waiting until age 70 to do so -- even though it would get them their maximum monthly benefit. A recent study by the Centers for Retirement Research at Boston College showed that only 4% of women and 2% of men wait until age 70 to file for Social Security. By contrast, 48% of women and 42% of men claimed their benefits at age 62, and only about 10% waited beyond their full retirement age.
With those numbers in mind, let's look at some of the reasons why so few people wait to claim Social Security at age 70.
1. For spousal benefits, waiting beyond full retirement age doesn't result in higher payments
The general rule for Social Security retirement benefits is that every month you wait between age 62 and 70 to file results in a higher monthly payout. Claiming before your full retirement age -- which is between 66 and 67 for those claiming this year -- will permanently reduce your benefit by up to 26%. Wait beyond full retirement age, on the other hand, and retired workers can get an 8% bump in their monthly check for every year they wait due to delayed retirement credits.
However, if you get spousal benefits based on someone else's work history rather than retirement benefits based on your own work record, then delayed-retirement credits aren't available. Waiting until full retirement age still results in a higher check than claiming at 62, but waiting until 70 just doesn't make sense, because it doesn't boost your check any further than taking your payments right at full retirement age.
2. For survivor benefits, you can sometimes claim early and get the benefit of waiting
If your spouse has passed away, then your survivor benefits and any retirement benefits from your own work history are treated separately. As a result, it can sometimes make sense to claim survivor benefits based on your deceased spouse's work record first while leaving your own retirement benefits to grow until age 70. At that point, you can then claim your presumably higher retirement benefits. That way, you can get some money now with the promise of more money later.
3. Waiting can cost your family valuable Social Security benefits
It used to be that you could wait to take your retirement benefits until age 70 without preventing your spouse from claiming spousal benefits. Under the old file-and-suspend strategy, you could file for benefits in order make your spouse eligible for spousal benefits, and then immediately suspend your own benefits. Then you could accumulate delayed-retirement credits while your spouse continued to receive spousal benefits. However, that loophole is now gone, so your spouse and any eligible family members cannot receive benefits based on your work history until you begin receiving your benefits.
4. A shorter life expectancy can make waiting an inferior choice
The trade-off with Social Security is that the earlier you take benefits, the smaller each monthly check is. But over your lifetime, you get more of those smaller checks, and it takes time for those who claim later in life to catch up with those who filed early. This has led to the development of Social Security breakeven analysis, which factors in your life expectancy to determine the age at which you should file in order to maximize your lifetime benefits.
Most retirees who file for benefits at age 70 will "break even" in their early 80s. If you believe you're unlikely to live that long, then claiming early can make more sense than waiting until age 70. Be sure to remember that your claiming decisions can have an impact on your family members after you're gone -- but even with that in mind, it's not always a bad idea to take benefits before age 70.
There are plenty of reasons why one might choose not to wait until age 70 to claim their Social Security, especially given people's natural predilection to grab income sooner rather than later. In many of the cases discussed above, it's entirely rational to take Social Security earlier than 70. It's still important, though, to think through the ramifications of your choice before you make a final decision on Social Security.
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