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3 Reasons to Delay Taking Social Security

By Matthew Frankel, CFP® - Dec 4, 2017 at 7:02AM

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Here are three good reasons you might want to wait as long as possible.

The vast majority of Americans take Social Security at or before their full retirement age, but there are some pretty compelling reasons to wait. If you're in a position where you could delay Social Security if you wanted to, here are three reasons why you may want to consider holding off on applying for your retirement benefits.

1. You're still working

To be clear, you can claim Social Security if you're still working. If you've already reached your full retirement age, you're also exempt from the "earnings test," meaning that no matter how much you earn at your job, your retirement benefit can't be reduced or withheld.

Older couple looking through paperwork.

Image source: Getty Images.

However, unless you need the additional money, it generally makes good financial sense to wait until you actually retire, thanks to the higher monthly benefit you'll get (more on that in the next section) and the potential tax implications of collecting benefits and a salary simultaneously.

Here's why. When it comes to federal taxation of Social Security benefits, the IRS uses something called your "combined income," which is the sum of your adjusted gross income (AGI), nontaxable interest, and half of your Social Security benefits. Depending on how much this is, up to 85% of your Social Security benefits could be taxable.

Tax filing status

Up to 50% of SS benefits are taxable if your combined income is...

Up to 85% of SS benefits are taxable if your combined income is...



Over $34,000

Married filing jointly


Over $44,000

Data source: IRS.

The point is that if you're working and collecting a full Social Security benefit, it's highly likely that you're going to fall into the combined income range where up to 85% of your Social Security benefits are taxable. If you wait to collect Social Security until after you stop working, this may not be the case.

2. You get a guaranteed 8% return for delaying retirement

It's generally impossible to achieve a high guaranteed rate of return on any investment, especially in a low-interest environment like we're in now. You're lucky to get a 1% return from a savings account or CD, and 10-year Treasury bonds pay a historically low 2.4% as of this writing.

However, by delaying Social Security, you're guaranteed a certain amount of benefit increase. If you've already reached full retirement age, your benefit will be increased by 8% for every year that you wait.

To put this in perspective, let's say that your full retirement age is 66 and that you'd be entitled to an initial monthly benefit of $1,500 per month (in 2017 dollars). Here's how delaying Social Security would permanently affect your monthly checks.

If you start benefits at age...

Your initial monthly check would be (2017 dollars)...

% increase from full retirement age
















Data source: SSA and author's own calculations.

Historically, stock investments have returned slightly more than 8% in the average year, but that's far from guaranteed. On the other hand, if you delay Social Security, you know the impact it will have.

3. Your spouse will get your higher benefit if you die

There are several strategies spouses can use when it comes to Social Security benefits, especially if both spouses worked and earned enough to qualify for benefits on their own work records.

One popular strategy is for the spouse who is entitled to the higher Social Security benefit to wait as long as possible to claim, while the other spouse claims at or before their own full retirement age.

The benefit of this is that it guarantees cash flow of at least the higher earner's benefit for life, even if they die first. The rules of Social Security survivors benefits state that if one spouse dies, the surviving spouse is entitled to collect their entire Social Security benefit.

For example, let's say that you are entitled to a benefit of $1,800 at your full retirement age, while your spouse is only entitled to $1,000. Your spouse could claim theirs at full retirement age, which would result in some income right away. Meanwhile, if you wait until 70 to claim your benefit, it would rise to $2,376 (based on a full retirement age of 66), resulting in total monthly income of $3,376 once you reach age 70. And if you die before your spouse, they can swap their $1,000 monthly benefit for your $2,376.

Delaying Social Security isn't right for everyone

To be clear, there are some perfectly valid reasons for taking Social Security at full retirement age or earlier, which is exactly what the majority of American seniors do. However, if you're in a good financial position and have the flexibility to delay Social Security if you want to, these are three reasons you may want to consider doing so.

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