Many people do their best to save for retirement but struggle nonetheless. And one way to compensate for a smaller nest egg is to try to get more money out of Social Security.
Now you're entitled to your complete monthly Social Security benefit based on your earnings history once you reach full retirement age, or FRA. That age is 67 if you were born in 1960 or later. But for each year you delay your Social Security filing past FRA, your benefits will grow 8%, up until age 70.
Image source: Getty Images.
This doesn't mean that you have to claim Social Security at 70. Rather, it's that there's no financial incentive to delay your filing beyond that point. And if your FRA is 67 and you file for benefits at age 70, you can boost your monthly Social Security income by 24% for life.
If the idea of a higher Social Security payday sounds appealing to you, you may want to plan on filing for benefits around your 70th birthday. And that's certainly a good plan in theory. But here's why it could backfire on you.
When life throws you some unwanted surprises
To be able to claim Social Security at age 70, many people need to work until age 70. If that's the boat you're in due to not having a lot of retirement savings, you might just say to yourself, "Okay then, guess I'm working until my 70th birthday."
But not so fast. You may be OK with the idea of working that long. But whether it ends up being an option for you is a different story.
You never know when a recession might strike the economy, causing a broad downturn for your industry. If that happens, you could find yourself out of a job in your mid- or late 60s without being able to find another one.
Plus, there's no guarantee that you'll be healthy enough to work until your 70th birthday. What if mobility issues start to emerge? What if your general health just starts to worsen, making a 40-hour workweek no longer feasible?
Or what if you manage to stay completely healthy, but your spouse winds up needing you as a full-time caregiver? That could make it difficult to impossible to continue holding down a job.
That's why you shouldn't assume that a Social Security filing at age 70 is a given -- even if you want to plan on one. Instead, you should make every effort to boost your retirement savings so that if you're forced to claim Social Security at an earlier age, it won't hurt you financially.
If you're currently saving $300 a month for retirement, try making it $350 a month for the next year, and from there, aim for $400 a month. You may not be able to max out your IRA or 401(k) plan through the years. But it's best to do something so that if your plan to claim Social Security at age 70 ends up falling through, you won't be left to struggle.
