Many seniors sign up for Social Security at 62 since it's the earliest possible age to claim benefits. Going that route means reducing your monthly benefit for life.
On the other hand, if you delay your Social Security filing until age 70, you'll score the maximum monthly benefit you're eligible for based on your earnings history. That's a pretty sweet deal -- so much so that you may be wondering if there's any downside to signing up at 70.
The quick answer? There could be.
Should you claim Social Security at 70?
You're entitled to your full monthly Social Security benefit once you reach full retirement age, or FRA, which is either 66, 67, or somewhere in between. You obviously don't have to sign up for benefits at FRA on the dot. You can file as early as 62 or as late as age 70. Technically, you don't have to claim your benefits by 70; there's just no financial incentive not to.
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Of course, signing up for benefits before FRA will result in a lifelong reduction, while filing at 70 will score you a major boost. Specifically, your benefits will increase by 8% for each year you delay past FRA. File at 70 with an FRA of 66, and you'll snag a 32% boost. If your FRA is 67, your boost will amount to 24% -- still impressive.
So why wouldn't you want to delay your benefits until 70? Well, for one thing, you might need them sooner. For many seniors, delaying benefits until 70 hinges on being able to hold down a job until then. If your company downsizes or health issues prevent you from working, then you may have no choice but to file for Social Security earlier than 70.
Also, waiting until 70 to claim your benefits could mean missing out on key opportunities when you're younger. Imagine you're offered the chance to join a three-month trip through Europe at age 67 that requires you to be in decent physical health. You decline due to a lack of funds. If you claim Social Security at age 70 but start having mobility issues, you may not be in a position to take that trip, despite money no longer being an issue.
Ultimately, the one drawback of filing for Social Security at 70 is that you're taking the chance that you'll end up living a long life. Social Security is technically designed to pay you the same total lifetime benefit regardless of when you initially file. If you delay benefits till 70, you'll boost them on a monthly basis, but collect fewer individual payments. All will even out if you live an average life span. If you live a long life, you'll generally come out ahead financially by delaying benefits, but that's a gamble in its own right.
Imagine you're entitled to $1,500 a month at an FRA of 67. Filing at age 70 will give you $1,860 a month instead, but you'll collect 36 fewer payments. If you live until age 82 1/2, you'll break even with a lifetime total of $279,000 in benefits, and for each month you live beyond that point, you'll come out ahead financially on a lifetime basis. If you're not confident in your health, however, then you may not want to take that chance.
The bottom line on claiming Social Security at 70
Filing for Social Security at 70 gives you a key opportunity to enjoy more wealth in retirement. There are risks involved, and it's important that you know about them going into your senior years. In fact, if your health fails you, claiming benefits at 70 could ultimately leave you with less money to enjoy during retirement. Be sure to weigh the pros and cons before making your filing decision.
