Eligible seniors get an eight-year window to file for Social Security that begins at age 62 and lasts all the way up until 70. Now you may be wondering: "Why would I wait until 70 when I can get my money sooner?" The reason is that you're not actually entitled to your full monthly Social Security benefit until you reach full retirement age (FRA), which kicks in at 66, 67, or somewhere in between, depending on your year of birth.
Your benefits themselves are calculated based on how much you earned during your top 35 working years, but if you claim them before FRA, you'll reduce your benefits for each month you file ahead of that milestone. On the other hand, if you delay benefits past FRA, you'll boost them by 8% a year, up until age 70.
It's for this reason that some seniors are tempted to claim Social Security at 70, even if it means holding off on accessing money they're entitled to at an earlier age. If you're wondering whether filing for benefits at 70 makes sense for you, ask yourself these three questions first.
1. Do I need the money sooner?
There's something appealing about the notion of locking in a guaranteed 8% boost in benefits by holding off on Social Security. But if doing so causes you to fall behind on your bills, and you're forced to charge them on a credit card and carry that balance for years, then the interest you wind up paying on that sum will likely far surpass the 8% increase you'll get by waiting on Social Security.
Before you make the decision to file for benefits at 70, ask yourself whether you need the money before that point. If you're doing fine financially and can swing your living expenses, then it absolutely pays to hold off, grow your benefits, and collect a higher monthly payment for life. But if you're desperate for cash to the point where you can't pay your basic bills, there's no sense in waiting longer than necessary, especially if you've already reached FRA.
2. How's my health?
Filing for benefits at 70 will result in a higher monthly payment than what you'd otherwise collect -- but that doesn't mean you'll end up with a higher lifetime payment. If your health is great, then holding off on Social Security generally makes sense because if you live a long life, you'll come away with more money from the program. If your health is poor, on the other hand, claiming earlier is usually the better way to go.
Imagine you're entitled to a monthly benefit of $1,500 at an FRA of 67. Waiting until 70 to file will increase each individual payment you collect to $1,860, but you'll need to account for the fact that in doing so, you'll receive 36 fewer payments than you would by filing at 67. If you live until 82 1/2, you'll break even under both scenarios -- meaning you'll wind up with $279,000 from Social Security whether you file at 67 or file at 70. But if you live until 85, you'll come out nearly $11,000 ahead by virtue of waiting until 70.
On the other hand, if you pass away at 78, you'll end up losing out on over $19,000 in lifetime income by filing at 70 rather than at 67. Therefore, if you're thinking of taking benefits as late as possible, first ask yourself what your health looks like and whether you're likely to live a long life or not.
3. Will delaying benefits cause me to miss out on lifelong goals?
Maybe you don't need your benefits right away to pay your living expenses but you want that money to travel, start a business, or fulfill other lifelong goals while you're relatively young and healthy. If that's the case, filing for Social Security at 70 could mean missing out on the opportunity to achieve some of your long-term dreams.
If you're entering retirement without much in the way of personal savings and you expect Social Security to serve as your primary income source, then you may need to push those goals aside and focus on securing a higher monthly benefit so you don't risk struggling financially during your golden years. But if your savings are in decent shape, think about what having that money before age 70 might allow you to do.
The decision to file for Social Security is a tricky one, so give yourself time to weigh your options. It may be the case that claiming benefits at 70 is the right move for you. Or maybe it's not. The more thought you put into the decision, the more likely you'll be to make the right choice.