Are you unsure of when to start claiming Social Security benefits? Figuring out the best Social Security claiming strategy is complicated because there's a lot of factors to consider to try to optimize your benefits. Your health, other sources of income, whether you can qualify for spousal benefits, and a host of other issues all come into play when you make the choice about when to get benefits for the first time.
As you consider your options to decide what age is best, delaying your claim for benefits may emerge as a viable approach. There are lots of advantages to claiming benefits at age 70, instead of at full retirement age or age 62 when you first become eligible for benefits. However, there are also some downsides.
Let's take a look at both the pros and cons of claiming Social Security at 70 so you can get more insight into what age is best to start collecting.
Advantages of taking Social Security at 70
The big advantage of taking Social Security at age 70 is your benefit will be higher than it would be if you'd claimed benefits earlier.
Social Security sets a full retirement age, based on your birth year. If you were born after 1960, your full retirement age (FRA) is 67. If you retire before 67, your benefits are reduced. But, for each month you wait after 67, your benefits are increased by 2/3 of one percent per month -- up until age 70.
If your FRA was 67 and you wait until 70, the monthly benefits you'll receive will be 24% larger. If you'd have received $1,500 in benefits at 67, you'd received $1,860 at age 70. The extra benefits can be worth a lot of money, especially compared with how much you'd receive at 70 versus how much your monthly benefits would've been at 62 (when you first become eligible for full benefits).
Because Social Security provides guaranteed lifetime income that increases as the cost of living rises, researchers from Stanford University analyzed different retirement scenarios and found claiming Social Security at 70 was the optimum approach. By working until 70 or drawing down your savings after leaving the workforce to delay claiming benefits, you can maximize the guaranteed lifetime income you get.
Disadvantages of taking Social Security at 70
While getting more money every month is a big perk, you don't want to forget the downsides of delaying your claim for benefits:
- You may face years of financial struggle: If you're forced out of the workforce before 70 or you decide to retire early, you may need money from Social Security to provide a reasonable standard of living. If your savings aren't enough to comfortably support you, struggling in poverty for years just to preserve a higher Social Security benefit doesn't make sense.
- You may be too old to enjoy your money: Health issues can creep up on you quickly as you get older, and by age 70, you may not have the stamina or strength to travel much. If you took Social Security earlier and had more money, you'd be able to use that money to enjoy life while you can. Of course, you could face big healthcare costs when you're older and be sorry you didn't wait to claim benefits if you need money for care.
- You may die before you break even: As this chart shows, it can take you 10.4 years of receiving higher monthly benefits from Social Security starting at 70 to make up for eight years of benefits you miss by not claiming at 62, assuming average benefits. This means you need to live until 80.4 to break even. Since the average life span in the U.S. is 78.6, your odds may not be good.
- You lose the chance to invest your Social Security income: If you don't need the money to live on, you could still claim Social Security benefits at 62 or 67 and invest the money. You may be able to earn good returns on your investments and build your savings up enough to end up better off.
If you want to delay claiming Social Security benefits until age 70, consider whether you may have other sources of benefits available to you. Depending on your situation, you could potentially claim on your spouse's work record and leave your own benefits untouched until they max out.
What's the right approach for you?
Ultimately, it's up to you to decide what the best approach is for claiming Social Security. Before you do, make sure you can answer key questions about how the program works, including what your full retirement age is and how your benefits will be impacted by the age when you claim them.
If you do your research, you can decide on your optimal age to claim benefits, maximize your income, and use the money coming to you to enjoy your golden years.