Delaying a Social Security claim is often a smart financial choice. By putting off claiming retirement benefits as long as possible until age 70, you can increase the size of your monthly payout. Many people also receive more lifetime benefits with a delayed Social Security claim.
However, there are three situations when filing for benefits late makes no sense.
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1. If you're claiming spousal benefits
If your spouse earned more than you, you may be better off with spousal benefits rather than your own Social Security checks. Spousal benefits are also available to you even if you don't qualify for Social Security on your own, as long as you're married or are divorced after a marriage lasting at least 10 years.
If you are claiming spousal benefits, it doesn't make sense to delay starting them beyond your designated full retirement age. Unlike with Social Security retirement benefits, you do not earn delayed retirement credits for spousal benefits.
The maximum monthly payment you can get is 50% of your spouse's primary insurance amount. If you claim your benefits early before FRA, you'll shrink this payout. But if you delay beyond FRA, you won't increase it.
There's no reason to put off a benefits claim if doing so won't raise your monthly payment. You'd just be giving up income you're entitled to for nothing.
2. If you're in poor health and have a short life expectancy
Delaying Social Security can often pay off because you earn bigger checks by waiting to claim benefits. Eventually, you will hopefully receive enough of those bigger checks to offset all the income you gave up by not claiming Social Security as soon as you became eligible at age 62.
If you are in poor health, though, then putting off Social Security may mean you die before you get any checks, or before you get enough checks to make up for forgone income. If you suspect you will not live long, you may want to claim Social Security early before your full retirement age so you can get as much money as possible before you pass.
There's one caveat to this, though. If you were the higher earner in your marriage, an early Social Security claim will reduce survivor benefits. You may want to put off your claim even if you personally won't benefit by doing so in order to leave more money for your surviving spouse after you're gone.
3. If you will drain your savings dry
Finally, if you have to drain your savings to delay your Social Security claim, it's not worth it. You would need to put off claiming benefits until 70 to get the maximum monthly Social Security income due to waiting. And many people can't wait that long to stop working.
If you have to leave work before 70, you'll need money to live on. And if you're trying to get these funds entirely from your savings, you may end up exceeding a safe withdrawal rate. It is absolutely not worth emptying your investment accounts just to get a larger Social Security check, since you can't live on Social Security alone, even if you've maximized your benefit.
The bottom line: If you must withdraw too much from your savings to avoid a delayed Social Security claim, don't do it. Start your benefits so you can make sure you have lifetime income from both sources.
Outside these situations, delaying could make sense, but you'll always want to calculate your break-even point (the point at which your extra monthly payments make up for missed income) to make the right choice.
