The tricky thing about Social Security is deciding when to take benefits. Eligible seniors get an eight-year window to file that begins at age 62 and ends at age 70. Smack in the middle of that window is full retirement age, otherwise known as the age at which benefits can be received in full. Filing before full retirement age, which depending on your year of birth, is either 66, 67, or somewhere in between, will cause your benefits to shrink, while waiting past full retirement age will cause them to increase by 8% a year.
Now technically speaking, you don't have to sign up for Social Security once you turn 70. But since you can't grow your benefits past that point, it's generally considered the latest age to file for them.
So should you file for benefits at 70? Here are three scenarios where it pays to wait as long as possible.
1. Your health is great
The interesting thing about Social Security is that it's designed to pay you the same total lifetime benefit regardless of when you initially file. The logic is that any increase you receive by waiting on benefits will be offset by the smaller number of individual payments you collect (for example, delaying benefits past a full retirement age of 67 and waiting until 70 results in 36 fewer payments). That formula, however, only applies if you live an average life span. If you live much longer than the average senior, you'll get more money from Social Security in your lifetime by waiting to file as long as you can.
Imagine you're entitled to a $1,500 monthly benefit at your full retirement age of 67. Waiting until 70 will increase each monthly payment of yours to $1,860, and if you live until 82-1/2, you'll come out with a lifetime total of $279,000 regardless of whether you file at 67 versus 70. But if you wind up living until 90, you'll come out over $32,000 ahead by waiting until 70 to file. Therefore, if your health is great, it often pays to wait.
2. You're low on personal savings
If you don't have much money in your nest egg, you'll likely end up relying on Social Security to pay for a large chunk of your retirement expenses. At that point, it pays to grow those benefits as much as possible to secure a higher monthly income stream.
3. You're still working
If you're still working and collecting a paycheck, it stands to reason that you won't need your Social Security income to pay your regular living expenses. Therefore, you might as well let your benefits grow for as long as you're able and willing to stay at that job.
On the other hand, claiming Social Security at 70 doesn't always make sense. Here are a few scenarios where it pays to take your benefits sooner.
1. Your health is poor
We just learned that seniors who expect to outlive their peers are often better served financially by waiting to collect Social Security as long as possible. Well, the opposite holds true if your health is in bad shape. In that case, you're generally better off filing right away -- which could mean as early as 62.
2. You need the money immediately
Just because you plan to retire at a certain age doesn't mean that'll actually happen. Surprisingly, 60% of Americans end up being forced to retire sooner than planned, according to data from Voya Financial, and the reasons run the gamut from health issues to getting laid off to needing to care for loved ones. If that happens to you, and your savings alone can't cover your bills, then you're better off filing for Social Security immediately than waiting until 70 to get benefits and racking up debt in the process.
3. Your job is making you miserable
Many folks are fortunate enough to love their jobs and get satisfaction from going into the office. But if your job mostly makes you unhappy and causes you stress, then forcing yourself to keep plugging away so you can delay benefits until 70 basically means torturing yourself for what could be no good reason. Now if you're behind savings-wise, then yes, you will need to push yourself to stay on the job and grow those benefits to avoid struggling later on. But if you've saved appropriately, you should let yourself off the hook, claim your benefits sooner, and free yourself from a situation that could be detrimental not just to your mental well-being but your physical health as well.
Whether 70 is the right age for you to claim Social Security will heavily depend on your health, work situation, and savings level. Do an honest assessment, and with any luck, you'll make the right choice for your retirement.