The tricky thing about filing for Social Security is that you're not limited to a single age in doing so. You're allowed to claim benefits as early as age 62, and while you technically don't have to file by 70, there's no financial reason to wait past that point. As such, 70 is generally considered the latest age to take benefits -- but it is the right time for you?
Why file for Social Security at 70?
Your monthly Social Security benefits are calculated based on how much you earned during your highest-paid 35 years of wages, and you're entitled to your full monthly benefit once you reach full retirement age. That age, depending on your year of birth, is either 66, 67, or somewhere in between. Now as mentioned earlier, you're allowed to file for benefits sooner, but for each year you claim Social Security ahead of full retirement age, your benefits will be reduced, and in most cases, on a permanent, lifelong basis.
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On the other hand, you also get the option to delay benefits past full retirement age, and boost them by 8% for each year you hold off. This incentive runs out at age 70, but if you're looking at a full retirement age of 67 and you file at 70 instead, you get a 24% increase in benefits that remains in effect for the rest of your life.
Clearly, that's a pretty good incentive to file for Social Security at 70. But in some cases, waiting that long doesn't make sense.
When 70 is the wrong age to file
Though claiming Social Security at 70 will increase your monthly benefits, it won't necessarily increase your lifetime benefit -- meaning, the total you collect from Social Security all-in. The longer you end up living, the more filing at 70 makes sense. And while you can't predict your own life expectancy, you can use your health nearing retirement as a guidance point. If your health is terrible, you're generally better off filing for Social Security early or on time. But if your health is great, and you have reason to believe you'll live a long life, then filing at 70 could pay off.
Imagine you're entitled to a monthly benefit of $1,500 at age 67. Waiting until 70 to claim Social Security will raise each monthly payment you get to $1,860, but you'll also collect 36 fewer payments in the process. At that point, you'll need to live until age 82-1/2 to break even -- meaning, to come away with the same lifetime total regardless of whether you file at 67 versus 70 -- which means that if you don't expect to live that long, filing at 70 is a bad idea.
Another reason you might claim Social Security before age 70? You've lost your job, can't find a new one, and don't have enough savings to pay your bills. At that point, you're better off taking benefits sooner than racking up dangerous credit card debt to pay your living expenses.
Finally, you might take benefits earlier than age 70 if you're secure financially, but simply want the money to travel or enjoy retirement when you're on the younger side. For example, if you have more than enough savings come age 65 to pay your senior living expenses for 30 years or longer, but you want your Social Security income to fund a number of expensive trips, then why not go for it? You've earned it, and you're apt to have more energy for that sort of thing at 65 than at 70.
The fact that you get the choice of when to file for Social Security is a good thing in theory. Still, it's not an easy decision. If you're thinking of claiming benefits at 70, take your health into account, and only wait that long if you believe you have a decent lifespan ahead of you. Otherwise, it may be worth collecting a lower monthly benefit, but increasing your chances of walking away with a higher lifetime total from Social Security.
