There's a reason so many people have a hard time determining how much of their savings to withdraw from each year in retirement, and why so many worry about depleting their nest eggs at some point in time. One of the biggest wild cards you'll encounter in the course of your retirement planning is not knowing how long you'll live.
Recent data from Northwestern Mutual reveals that 28% of Americans across all generations think it's likely that they'll live until age 100. And 40% of millennials and Gen Zers think there's a good chance they'll make it to their 100th birthday.
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But while living to age 100 is certainly a blessing, it can come with challenges -- and not just those that are health- and mobility-related. Living a very long life means you need to work extra hard to make sure your savings last. And if you're worried about ending up cash-strapped as a result of living longer, then there's one key Social Security move you should consider making.
A delayed filing could be a really smart move
When it comes to claiming Social Security, you get choices. You can sign up at any age starting at 62. But if you don't wait until your full retirement age (FRA) to file, your monthly benefit will be reduced. FRA is 67 for anyone born in 1960 or later.
Now you also get the option to delay your Social Security filing past FRA. For each year you do, up until the age of 70, your monthly benefits grow 8%. So if you're looking at an FRA of 67 and you don't claim Social Security until age 70, your benefits will get a permanent 24% lift.
That could come in extremely handy if you end up living until age 100. That's because Social Security is set up to pay you your monthly benefit for life -- regardless of how long that is. There's no guarantee that your savings will last that same amount of time.
Not only that, but you'll generally come out ahead financially on a lifetime income basis by claiming Social Security late when you end up living longer. Imagine you're entitled to $2,000 a month in Social Security at an FRA of 67. Delaying your claim until age 70 will give you $2,480 a month instead, but you'll go three full years without any payments.
If you sign up for benefits at age 67 and live until 100, you'll collect a total of $792,000 in Social Security income in your lifetime. But if you sign up at age 70 and live until 100, your total lifetime Social Security income will be $892,800. That's a difference of around $100,000.
Waiting could pay off
Without a crystal ball, it's impossible to know how long you'll live. But if you're confident you'll end up living a longer life, then it pays to consider delaying your Social Security filing as long as possible. Even if you don't end up living until age 100, a delayed filing could serve you very well financially if you're still kicking well into your 90s.
