Generally speaking, it's best not to become too dependent on Social Security during retirement. Those benefits will only replace about 40% of the paycheck you were used to collecting if you're an average wage earner. And many seniors inevitably wind up needing about twice that much income to keep up with their bills.
Still, Social Security is designed to pay you a monthly benefit for life once you file. So it's important to do what you can to score as high a monthly payday as possible.
Recent data, however, reveals that most Americans aren't taking a crucial step to boost their monthly benefits. And those who pass up that opportunity might sorely regret it after the fact.
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Can you afford to give up guaranteed income?
Some people invest in annuities because they like the idea of guaranteed income. Well, Social Security is another form of guaranteed income, so it pays to boost your monthly benefits to the greatest extent possible. And an easy way to do that is to delay your Social Security filing past full retirement age (FRA).
FRA is either 66, 67, or somewhere in between, depending on your year of birth. And it's the age when you can collect your complete monthly Social Security benefit, based on your personal income history. But for each year you delay your Social Security claim up until age 70, your monthly benefits will get an 8% bump -- and a permanent one, at that.
Despite that clear financial upside, a recent survey from Schroders, an asset management firm, found that only 10% of workers hold off until age 70 to file for Social Security. Meanwhile, the majority of workers stand to benefit financially by waiting to file.
It's easy to see why delaying Social Security until age 70 won't appeal to everyone. For some people, it could mean continuing to work full-time until age 70. And for those with notably poor health, filing for Social Security on the later side could mean walking away with less lifetime income from the program. That's clearly a risk some may not want to deal with.
Furthermore, if you have a giant nest egg to fall back on for retirement, then you may not really care what Social Security pays you each month. If you'd rather have your benefits sooner to travel, that makes sense.
But if you're someone who's reasonably healthy going into retirement without millions in savings, then it pays to consider delaying your Social Security filing until your 70th birthday. Retirement has a way of being more expensive than people bargain for, so having the extra guaranteed income could make it much easier to cover your expenses on a long-term basis.
Besides, one perk of being in retirement is getting to control what you do with your days. And the more money you're getting, the more options you have in that regard. So even if a higher monthly Social Security benefit only buys you the option to spend more money on enjoyment, it's worth delaying your claim.
