When you're making a decision about when to claim your Social Security benefits, there are a lot of factors to weigh. You can choose to start your benefits as soon as you become eligible at 62, and doing so may be attractive if you're eager for early retirement or you want to enjoy your money when you're young and healthy.
However, if you delay until the age of 70, you'll raise the size of your check for each year that you wait. And there is one really big, important reason why it makes sense for many retirees to delay until that age -- or at least as long as they can. Here's what it is.
The best reason to delay starting your Social Security checks as long as you can
The money you get from the Social Security Administration is probably going to be your only guaranteed source of lifetime income that's protected against inflation.
Generally, defined benefit pension plans are guaranteed for life -- but most people don't have access to those. As a result, most retirees will depend on two primary sources of funds: Social Security and the income their retirement investments produce.
Unfortunately, when you're depending on your investments, there's never any guarantee the money won't run out while you still need income from your portfolio. Now, you absolutely can reduce the risk of that happening by saving a hefty sum and choosing a safe withdrawal rate. Still, things can go wrong even when you have a good amount of money invested. Sadly, that means that very few people (outside of the extremely wealthy) can say with absolute certainty their retirement savings account won't just last for life but also provide enough income to maintain their buying power over a long retirement as prices rise due to inflation.
That leaves Social Security as the only sure thing for most people. And Social Security is a sure thing. While the program's trust fund is in financial trouble and benefits aren't quite keeping pace with inflation, there really is no doubt about whether these benefits will be there for future retirees. Cutting Social Security benefits is the third rail of politics that no lawmakers want to touch. Even if there's compromise legislation one day to shore up the program's finances, any cuts that happen as a result of it are likely to be small. A dramatic reduction in benefits is inconceivable due to the popularity of Social Security and the fact these are earned benefits you get access to by paying into the system.
Since it's impossible to predict exactly how long you're going to live and difficult to ensure with 100% certainty your investment account is definitely going to be large enough to provide enough money for life, it just makes sense to do all you can to maximize your sole source of guaranteed lifetime income.
After all, if you claim benefits early, you could shrink your check by as much as 30% compared with if you start them at full retirement age. On the other hand, if you wait until 70, you can increase your benefits by as much as 8% per year for each year of delay after full retirement age. If your savings does run short and you end up relying on Social Security as your only (or primary) means of support, you're going to be in a lot better position if those guaranteed lifetime checks are bigger ones.