If the COVID-19 pandemic has driven anything home, it's that we can't be sure what's around the corner. For retirees and near-retirees who have just seen the value of their savings plummet, a Social Security check that keeps coming through good times and bad is a reassuring thought. But you shouldn't rush into anything.
You can begin Social Security as early as 62, but your checks get larger the longer you wait to sign up until you reach the maximum benefit at 70. I'm a long way off from retirement, but right now, I'm aiming for that maximum benefit. It's not the right choice for everyone, but it's an option you should definitely weigh. Here are a few reasons I'm waiting until 70.
I want to get the most out of Social Security
Delaying benefits means I'll get checks for fewer years, but the larger checks mean there's still a good chance I'll end up with more money over my lifetime than I'd get if I started earlier. Here's a quick primer on Social Security benefits if you're a little lost.
Everyone has a full retirement age (FRA) assigned to them based on their birth year. If you were born between 1943 and 1954, it's 66. Every year after that, it rises by two months, until it hits 67 for adults born in 1960 or later. You must wait until this age to get the full benefit you're entitled to based on your work record. If you start before this, your checks will be smaller, and if you start later, your checks will be larger.
You'll only get 70% of your scheduled benefit per check if you begin Social Security right away at 62 and have a FRA of 67. Those with a FRA of 66 will get 75% of their scheduled benefit per check if they begin at 62. Waiting until 70 brings 124% of your scheduled benefit per check for if your FRA is 67 or 132% if your FRA is 66.
Life expectancy matters when deciding which starting age is best for you because it dictates how many years of checks you'll receive. I'm a pretty healthy person, so I anticipate I'll live into my late 80s or beyond. If I assume I'd get the current average Social Security benefit of $1,459 per month at my FRA, that means I'd get about $1,021 if I began at 62 and $1,809 if I began at 70.
If I live to 88, I'd get about $318,552 from Social Security if I began at 62. That's not bad, but I would get $367,668 if I started benefits at my FRA or $390,744 if I waited until 70. So in terms of lifetime benefits, it makes the most sense for me to hold out as long as I can.
But this isn't true for everyone. If you don't expect to live that long because of a terminal illness or a personal or family history of health problems, starting early is a better choice. You may as well claim what you can.
Larger checks bring more security in uncertain times
I sincerely hope I never live through another pandemic, but you never know. Even if that doesn't happen, something else might spark a recession that hurts the value of my retirement savings when I need them most. If that happens, I'd like to have larger Social Security checks I can count on to help support me.
Some people worry about the longevity of the Social Security program because its trust funds are slated to be depleted by 2035. But the program could continue paying out 80% of scheduled benefits until 2090, even if the government didn't intervene at all, which it likely will at some point. We don't know what the fix will look like yet. It's possible that Social Security may not go as far in the future as it is today. But one thing that isn't going to change is that you'll get larger checks if you delay benefits than you will if you start as soon as you're eligible.
I have other sources of income I can fall back on in retirement
I'm prioritizing my retirement savings right now while I'm young so I can build up a large nest egg to carry me through a few decades. I intend to use this money to cover all of my expenses between my chosen retirement date and 70, when I qualify for my maximum Social Security benefit.
If for some reason that's not possible, I have my husband's Social Security to fall back on. He is several years older than me, so we can claim benefits on his behalf before I'm even eligible if we need a little extra cash.
Not everyone is lucky enough to have those options, though. You might have to start Social Security early, even if you don't want to, to make ends meet. In that case, try to delay benefits as long as you're able to, but start claiming them when you need them to cover your bills.
My Social Security plan is subject to change. There's a lot that can happen between now and the time I'm eligible. You might be in the same boat, but that doesn't mean you should wait until you're ready to retire to make a plan. Explore a few different scenarios and decide which is the most advantageous starting age for you. Then, use this information to figure out how much you need to save per month and overall to retire comfortably.