You're not required to file for Social Security at one specific age. Rather, there's a range of ages you can choose from.
The earliest you can sign up for benefits is 62, and if you go that route, you'll get your money sooner, but you'll also permanently slash your benefits in the process.
Meanwhile, if you hold off on filing for Social Security until full retirement age, or FRA, you'll get the exact monthly benefit you're entitled to based on your earnings history. FRA is either 66, 67, or 66 and a specific number of months, based on the year you were born.
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There's no "final age" to claim Social Security -- you can delay your filing past FRA for as long as you'd like. For each year you delay beyond FRA, your benefits will increase by 8% until your 70th birthday. But there's no financial incentive to hold off on claiming past 70, so it's generally considered the latest age to sign up.
Most seniors don't wait until 70 to claim their benefits, but here's a very good reason why you should.
A higher benefit can make up for poor savings
On its own, Social Security might not do the best job of sustaining you throughout retirement. Those benefits will generally replace about 40% of your former paycheck if you're an average earner, and most seniors need a much higher level of replacement income to live comfortably.
A healthy nest egg can easily help bridge that gap. But if you don't have a lot of savings coming into retirement, then it pays to look at delaying your filing as long as possible so you can lock in a higher monthly benefit for life.
In fact, say you're entitled to a monthly benefit of $1,500 at age 67, and your retirement savings balance is such that it'll only provide an extra $5,000 a year in income. Assuming you don't have any other income sources to tap, that means you're looking at $23,000 a year to spend during retirement, which isn't a whole lot.
But if you delay your Social Security filing for three years, you'll boost your monthly benefit to $1,860. That means that combined with distributions from your savings plan, you'll have an annual income of $27,320 instead.
Furthermore, even if you try to withdraw conservatively from your savings, that money could eventually run out, especially if your investments end up doing poorly. But Social Security is set up to pay you for life, so the higher a monthly benefit you lock in, the more you'll collect throughout retirement -- no matter how long it lasts.
It pays to wait
Claiming Social Security at 70 is a great way to make up for a savings balance you're not happy with. And while going that route could require you to put in some extra time in the workforce and delay your retirement, it's a sacrifice worth making given the added financial security it'll buy you for the rest of your life.
