Putting off claiming Social Security can sound like a great financial move. That's because you can substantially increase the amount of money that you receive in your benefits check. And who doesn't want more money, especially in retirement when you may have limited funds and a lot of medical bills to pay?
But, while it's undoubtedly true that you'll see a benefits increase if you put off your first Social Security check until after age 62, when you first become eligible, this isn't necessarily the best choice for everyone. Here's why delaying your claim isn't always all it's cracked up to be.
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It can take a long time to make up for missed income
Often, the idea of delay is enticing when you see just how much extra money you can get by waiting to claim Social Security.
Say, for example, you would become eligible for a standard benefit of $1,600 at age 67. Your standard benefit is the amount you've earned based on your work history. You'd be able to claim exactly that amount at your full retirement age (FRA), which is between 66 and 6 months and 67 if you were born in 1957 or later. Now, if you claimed at 62 instead of 67, early filing penalties would reduce your payment to $1,120 while delaying until 70 would increase it to $1,984.
An extra $864 a month in retirement income sounds great. But you cannot forget that between age 62 and age 70, you could have been receiving checks but you weren't. During that eight year period, you would have passed up 96 payments. At $1,120 per month, that's $107,520 in forgone income.
Before you end up better off by waiting, you have to make all that money up with your extra $864 per month. That would take you 124.4 months or 10.37 years. Now, here's the problem. Since you wouldn't start getting the bigger checks until 70, you'd have to live until you're almost 81 years old to even break even for the delay. And then you'd have to keep living and getting more Social Security checks to end up with more lifetime income.
Putting off a benefits claim would not end up being worth it if you don't outlive your life expectancy, which is 76.4 years as of the most recent CDC data.
Not only could you possibly end up with less lifetime benefits by waiting, but if you can't retire without Social Security, you may end up spending some of your last healthy years on-the-job just because you're waiting for a higher future Social Security payout. You should seriously consider these downsides and risks before you delay
There's a caveat for married couples
While delaying Social Security doesn't sound quite as attractive once you consider forgone income in the intervening years, there is one other important thing to think about if you are married: survivor benefits.
When one spouse passes away, the other is able to continue receiving the higher of the two Social Security checks coming into the home. If you are the higher earner in your marriage and you claim Social Security early, you could shrink your check -- which could, in turn, shrink the amount of survivor benefits your widow(er) is left with.
If you don't want to leave your spouse in dire straits and you out-earned them, delaying Social Security to better provide for your partner could be the best move even if your delayed claim doesn't benefit you directly.
Ultimately, you should think about the big picture, including your marital status and the income you're forgoing, before you decide if the extra money that comes with a delayed Social Security claim is worth waiting for.
