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3 Reasons to Delay Filing for Social Security

By Matthew Frankel, CFP® - Updated Jun 8, 2017 at 5:47PM

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The question of what is the best age to file for Social Security doesn't have the same answer for everyone, but waiting longer to start collecting your retirement benefit can pay.

Americans who qualify for Social Security retirement benefits have the option of starting to collect their monthly checks any time between the ages of 62 and 70. While this is a pretty wide window, it may surprise you to learn that the vast majority of Americans start collecting Social Security at or before their full retirement age, and just 12% choose to delay filling past age 66.

While there certainly are some good reasons not to delay filling for Social Security, it does make sense in certain situations. Here are three reasons why choosing to wait as long as you can before starting to collect Social Security can make good financial sense for you.

70-something couple reviewing their finances.

Image Source: Getty Images.

1. You get more inflation-protected income for life

The Social Security program is designed so that its benefits will replace about 40% of the pre-retirement income of the average beneficiary who claims at full retirement age.

However, for every year you delay collecting beyond your full retirement age, your monthly benefit gets be permanently increased by 8%, until as late as age 70. So, if your full retirement age is 66 and you wait that extra four years to claim your benefits, your monthly payments will be 32% higher. (If you're not sure what your Social Security benefit is likely to be at your full retirement age, here's a quick guide to help you figure it out.)

It's important to mention that the system is designed so that, on average, a retiree will receive the same total amount of benefits regardless of when they choose to claim. But the formula is based on an average lifespan; if you are worried about having enough income in retirement to live a comfortable life, choosing to delay Social Security is one way to permanently boost your monthly income.

The overall effect of this permanent increase is that if you're an average earner who reaches full retirement age in 2017, by delaying Social Security until age 70, your Social Security retirement benefits could replace more than half of your pre-retirement income, not just 40%. And thanks to annual cost-of-living adjustments, this income will be largely protected from inflation.

2. You're in good health, or have a family history of longevity

As noted above, the Social Security benefit structure is designed with the idea that the sum of all the payouts a retiree receives through retirement should be about the same, regardless of when they file. However, keep in mind that this is just based on averages. Your individual situation likely will be different.

According to the Social Security Administration's actuarial life table, the average person who starts collecting benefits at age 62 will live another 21.4 years (20 men, 22.8 women), while the average 70-year-old can be expected to live for 15.3 more years (14.2 men, 16.4 women). Again, this is based on the average person, who is in average health.

Therefore, if you have a heart condition, high blood pressure, or are otherwise not in good health, you're probably better off claiming early. On the other hand, if you're still in good shape, maybe had relatives who lived well into their 90s, and generally think your odds are good of  having a longer-than-average lifespan, it can certainly pay to wait.

It's true that sometimes, apparently perfectly healthy people die early, while some outliers who smoke two packs a day and never exercise will live into their 90s. The point is that waiting increases the odds for healthy retirees to get the most value out of Social Security.

3. You don't need the money yet

Finally, perhaps the best reason to wait to claim Social Security is that you simply don't need the money yet. And, this reason goes hand-in-hand with the other two I've mentioned.

For example, if you get laid off from your job at age 65 and don't have enough income from your retirement savings, it doesn't really matter that you could get a larger monthly benefit by waiting – you need the money now, so go ahead and file. Similarly, if you're in excellent health and have every reason to believe you'll live to 95, it's only a good idea to delay Social Security if you can realistically afford to do so.

On the other hand, if you're still working with no immediate plans to stop, or have enough money in your 401(k), IRA, or other retirement accounts, it can be a smart idea to let your future Social Security benefit grow as long as possible.

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