Social Security isn't something everyone is entitled to automatically. To qualify for benefits during retirement, you need to work and pay taxes on your income (or be married to someone who qualifies for benefits).
It's for this reason that so many seniors are invested in getting the most out of Social Security, and understandably so. And you'll often hear that the best way to maximize your benefits is to delay your filing until age 70.
You're entitled to your full monthly Social Security benefit based on your personal earnings history once you reach full retirement age, or FRA, which hinges on your year of birth. It's either 66, 67, or 66 and a specific number of months.
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For each month you delay your Social Security filing past FRA, your benefits get a small boost. Hold off for a year past FRA, and you're looking at an 8% increase.
This incentive only applies until 70. At that point, you can't grow your benefits any more, which is why 70 is considered the latest age to sign up for Social Security (even though you could technically continue to delay your claim).
If you're looking at an FRA of 67, claiming Social Security at age 70 could mean locking in a monthly benefit that's 24% higher than what it would've been at FRA. And that boost remains in effect for the rest of your life.
As such, filing at 70 might sound appealing. But it won't necessarily be your best move, financially speaking. In fact, if one circumstance applies to you, then you're much better off claiming your benefits well before your 70th birthday.
Look at the big picture
Delaying your Social Security claim until age 70 might give you a higher monthly benefit. But will it result in a higher lifetime benefit? That's debatable.
Generally, to come out ahead financially in your lifetime by filing at age 70, you need to live a pretty long life. And so if you have health issues at the time you're reaching FRA -- issues you think might shorten your life span -- then it generally doesn't pay to delay your claim.
Let's imagine you're entitled to a monthly benefit of $1,700 at an FRA of 67. Delaying your filing until age 70 will bump that benefit up to $2,108, which looks like a nice boost.
But you'll need to live beyond age 82 1/2 to come out ahead over your lifetime after delaying your Social Security claim until age 70. If you pass away at any point before then, you'll end up with a lower lifetime benefit.
Here's another way to look at it. Let's say you live until age 77. If you claim your $1,700 benefit at FRA, you'll end up with a lifetime payout of $204,000. Wait until age 70, and you're looking at a lifetime benefit of just $177,072.
Be realistic about your life span
It's uncomfortable to think about passing away at a relatively young age. But if you're not confident you'll live a long life, then it generally pays to claim Social Security well ahead of 70.
In fact, you might not even want to wait until FRA if your health is really poor. You're allowed to file for Social Security beginning at age 62. Doing so will result in a monthly benefit that's significantly reduced. But you might still come out ahead on a lifetime basis if you sign up for Social Security as early as possible.
