The money you get from Social Security might be the one thing that really gets you through retirement. Many people wrap up their careers without having a lot of money in an IRA, 401(k), or other savings plan. So they become heavily reliant on Social Security once retirement rolls around.
You may have heard that the monthly Social Security benefit you lock in at the time of your filing will be the benefit you collect for life. And that's largely true.
Social Security benefits are entitled yearly to cost-of-living adjustments. But other than those adjustments, the monthly benefit you start out receiving is the same benefit you can expect throughout your retirement. As such, it's important to file at the right age to get the most out of Social Security.
Meanwhile, you're entitled to your full monthly Social Security benefit based on your earnings history once you reach full retirement age, or FRA. That age is either 66, 67, or 66 and a specific number of months, depending on the year in which you were born.
You can also file for Social Security before or after FRA. Filing early will reduce your benefit, while delaying your filing will boost it for life.
If your goal is to get the highest monthly payday out of Social Security, then you don't need to develop a stealth strategy to make that happen. All you need to do is put off your filing until the age of 70, which is when delayed retirement credits stop accruing. While that's an easy way to grow your monthly benefit, you may want to go a different route.
Look at the big picture
Filing for Social Security at age 70 will result in a higher monthly benefit. It won't, however, guarantee you a higher lifetime benefit. And if you wind up passing away at a relatively young age, then you could end up losing out financially by postponing your filing that long.
Let's say you're entitled to $2,000 a month from Social Security if you're FRA is age 67. Hold off on claiming benefits until age 70, and you'll be looking at $2,480 a month, instead. That's a nice bump, but it doesn't guarantee a higher lifetime payout.
If you pass away at age 76, filing at age 70 rather than FRA will mean collecting $37,400 less in Social Security in your lifetime. So you shouldn't assume that a delayed filing is automatically your best bet.
Of course, the tricky thing in this regard is predicting your own life span. That's something nobody can do with certainty.
If you have health issues going into retirement, and your parents and grandparents passed away in their early or mid-70s, then you may want to file for Social Security at FRA or even earlier to score what could end up being a higher lifetime payout. On the other hand, if your health is great as retirement gets close and your parents and grandparents all lived well into their 90s, then filing at 70 could be a smart way to go.
Ultimately, delaying your Social Security claim until age 70 is an easy, guaranteed way to lock in a higher monthly benefit. Just make sure this route really makes sense before committing to it.