Decisions, decisions. Many decisions that we make, such as what to have for lunch or whether to wear a blue or black suit to work, don't matter all that much. Other ones, though, such as decisions related to our retirement, can have a significant impact on our future financial security and, therefore, on our future happiness.
A key retirement-related decision that many of us will have to make is when to start collecting our Social Security benefits. You can start as early as age 62 and as late as age 70, and you'll make your benefit checks bigger or smaller depending on whether you start collecting late or early. To make your checks as fat as possible, delay starting to collect until age 70. But should you do that? Not necessarily.
Here's a look at some reasons you might want to claim your Social Security benefits at age 70 and why you might not.
Reasons to claim Social Security at 70
Let's start with why you might delay collecting until age 70. Know that each of us has a full retirement age at which we can start collecting our "full" retirement benefits -- every dollar to which we're entitled. For most of us these days, that age is about 66 or 67. But for every year beyond your full retirement age that you delay, up to age 70, your benefits will increase in value by about 8%. Delay from 67 to 70, and you can make your checks 24% bigger. That sure seems like a pretty good reason to delay. Here are some more:
- You can't afford to retire early. Many people are way behind in their savings for retirement. Thus, they expect to be retiring later than they'd like to. (About 19% of workers 55 and older report having less than $1,000 saved for retirement, according to the 2018 Retirement Confidence Survey.)
- You don't need the money. If you're lucky enough to not need the income you'd get from Social Security until age 70 or beyond, waiting for bigger checks can be a reasonable choice.
- You expect to live a long life. An underappreciated fact about Social Security is that if you live an average-length life, your total benefits will be about the same whether you start collecting early or late. Start early and you'll get smaller checks, but there will be many more of them. Thus, if you stand a good chance of living a long life -- and if you aren't in urgent need of income before age 70 -- consider waiting until age 70 for those fatter checks.
- You earn more than your spouse. If you expect to live an average-length life or even a shorter one, it can still make sense to delay, in some circumstances. For example, imagine that you're married and that you have always earned much more than your wife. You might decide together that she will start collecting early or on time and that you'll try to hang in there until age 70. That way you both get some income early, and much more income, from two checks, once you turn 70. When one of you dies, the survivor will collect only one of those two checks but can take the bigger one.
- You plan to keep working. If you plan to keep working until age 70 or so, know that Social Security reduces your Social Security check by $1 for every $2 you earn in income from working above $17,640 if you're under your full retirement age. If you're at or older than your full retirement age, your benefits are docked by $1 for every $3 that you earn above $46,920. (These income thresholds are for 2019. They change from time to time.) It's not the end of the world, as those withheld benefits don't disappear; instead, they're used later to increase the size of your monthly payments.
Reasons to not claim Social Security at 70
That's a lot of reasons to consider waiting until age 70 to claim your benefits. But the reasons to not wait are just as compelling, if not more so:
- You stand a decent chance of living a life below-average in length. If you're not in good health, or many of your relatives have died young, starting to collect those checks as soon as possible will help you maximize the money you get from the program.
- You want to retire early -- and can. If you've been diligently socking away money for your retirement and you're just about able to retire early, having Social Security income can help you do so. Retiring early is a great move for most people who can do it, as it means they will be younger at the beginning of retirement, and likely more able to enjoy it, being active, traveling, and perhaps playing some sports.
- You need the money as soon as possible. While many people retire early because they planned to, many others just end up out of work sooner than they expected, often without enough money to support them comfortably. Thus, getting those Social Security checks can be a lifesaver.
- You earn less than your spouse. If you've earned less over your working life than your spouse, then your benefit checks are likely going to be smaller than theirs. The two of you might employ the strategy outlined above, with you starting to collect your checks early, while they wait until age 70, if possible.
- Benefits might be cut in the future. A last consideration is this: Social Security changes from time to time. Benefit levels can change, increases can change, tax rates that support Social Security can change, and so on. The program is facing some challenges in the years ahead, as its years of running a surplus are running out, and while our representatives in Congress can strengthen the program, they may choose not to. Some think it's not a bad move to start collecting your benefits as soon as you can, in case they end up reduced, as you may be grandfathered in at the higher level. Remember that this is just speculation, but it's worth a little consideration.
The decision about when to start collecting Social Security benefits is a personal one, depending on your needs, your financial situation, and any strategies you have in place. Be sure to read up on Social Security, so that you make smart decisions that will maximize your future income.