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Social Security: 3 Times It's Not Dumb to Wait Until 70 for Your Retirement Benefits

By Dan Caplinger - Oct 8, 2017 at 7:01AM

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Deciding when to claim your retirement benefits can be hard, but in these cases, it's worth the wait.

Nobody likes to wait to get their money from Social Security, and in many cases, it's downright dumb not to get your benefits a lot earlier than the latest reasonable claiming age of 70. But more people make the mistake of claiming their benefits too soon, missing out on potentially lucrative payouts that can last the rest of their life -- and even beyond, if they have a spouse or other loved ones who are entitled to survivor benefits on their work record.

Below, we'll look at three cases in which it's definitely not dumb to wait until you turn 70 filing for your retirement benefits.

1. You'll get taxed on your benefits if you claim earlier

One thing that comes as a surprise to many Social Security recipients is that you can sometimes have to pay income tax on a portion of the benefit income you receive from the Social Security program. Under current law, you can be forced to include as much as 85% of your benefits as taxable income, meaning that you'll pay whatever your current tax rate is on that amount.

The good news is that there are income limits below which none of your Social Security benefits are subject to tax. Perhaps the most common situation in which Social Security becomes is when the older spouse in a married couple has retired and is receiving benefits, while the younger spouse continues to work and earns taxable wages. In those cases, waiting until 70 can give the younger spouse time to catch up and retire, and at that point, you may be able to reap the benefits of higher monthly payments without worrying about taxes.

Older man and woman running through park

Image source: Getty Images.

2. You're already receiving survivor benefits from Social Security

Surviving spouses who receive survivor benefits from Social Security have an unusual opportunity. In most cases, Social Security requires you to claim multiple benefits to which you're entitled at the same time, preventing you from claiming one while deferring another. However, survivor benefits are treated as being separate from your own retirement benefit.

This opens up a planning strategy that can maximize your total benefits. Claiming your survivor benefits lets you collect monthly checks from Social Security, but you can restrict your application just to those survivor benefits. This allows your retirement benefits to continue to grow, avoiding early-claiming penalties and earning delayed-retirement credits until you hit age 70. Then, you can claim your maxed-out retirement benefits. This works best when your own retirement benefit would be roughly the same as what you get from survivor benefits if you claimed early, because by waiting, you can collect a similar amount now and get much larger monthly checks at 70 and beyond.

3. You have other money available now and want greater certainty later

Social Security is unusual in that it provides a lifetime guarantee of income no longer how long you live. It's costly to replicate that feature in a private investment; immediate annuities provide similar protection but require a substantial up-front premium payment.

If you're fortunate enough to have other assets that you've set aside for retirement, then using them can help you bridge the gap between when you retire and age 70, letting your retirement benefits grow as large as they can. That in turn pushes more of your Social Security benefits toward the back end of your retired years, and that can come in especially handy if you have a long retirement. Moreover, if you have a spouse who can claim benefits based on your work history, then making sure your monthly check is as large as possible can have a positive impact on your spouse's survivor benefits if you pass away first.

It's hard to wait until 70 before claiming Social Security, but contrary to what some believe, it's not always a dumb move. Those in any of the three situations above should seriously consider waiting to claim their retirement benefits, because the advantages can be substantial compared to filing early.

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