Retiring on Social Security alone could mean winding up being cash-strapped for years on end. In spite of that, many seniors inevitably reach retirement age without a lot of money in an IRA or 401(k). And that leads them to be more reliant on Social Security than they would've hoped.
Meanwhile, people who are nearing retirement without much or any money in savings are often advised to delay their Social Security filings until the age of 70. You're entitled to your full monthly benefit based on your income history once you arrive at full retirement age (FRA), which is either 66, 67, or somewhere in between, depending on your year of birth. For each year you delay your filing past FRA, your benefits grow 8%, up until age 70.
Anyone whose nest egg is sorely lacking in funds should seriously consider claiming Social Security at age 70 to score a higher benefit to compensate. And filing for benefits at age 70 is something I'm planning to do, too -- only for a slightly different reason.
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I'm hoping I won't need the money at all
Despite so many rumors about Social Security's disastrous future, I know that the program isn't in danger of going away completely. The worst-case scenario we're looking at right now is benefit cuts, which aren't a great thing at all, but are a far cry from a complete lack of benefits.
In spite of that, I've written off Social Security as a retirement income source. And the reason is that I want to motivate myself to save as much money as possible in my retirement account.
If I repeatedly tell myself that Social Security won't be there for me (even though I know that's not true), it might push me to save and invest an extra $500 here and $1,000 there rather than spend that money on things that bring me temporary gratification. And so when I sit down to look at my retirement plan, it doesn't include income from Social Security.
And that's really why I plan to file for benefits at age 70. If I put myself in a position where I don't need the money sooner, or at all, then I can file whenever I please and not have it make a difference.
In fact, what would be ideal for me is to file for Social Security, collect benefits, and then give that money away -- either to charity, family members who could use a financial lift, or both. And if I'm able to wait until age 70 to sign up for benefits, I'll have even more money I'm not counting on to use for that purpose.
Of course, some people who save well for retirement still need to rely on Social Security to some degree, and there's no shame in that. Plus, for all I know, I'll end up in that boat, too, despite my aggressive stance on saving.
But if that's the case, filing at age 70 will still make the most sense, because the key will be to collect as much income as possible to make up for a savings shortfall. So either way, it looks like age 70 is my target age for claiming benefits, no matter the reason behind it.
