When it comes to claiming Social Security, you get the flexibility to choose a filing age that works for you. That choice may be based on factors such as your health, your work status, your retirement goals, and the amount of money you have in savings.
You can sign up for Social Security at any age starting at 62. But you're not entitled to your full monthly benefit based on your lifetime earnings until full retirement age (FRA) arrives. That age is 66, 67, or somewhere in between, depending on the year you were born.
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There's also the option to delay your Social Security claim past FRA. For each year you do, up until age 70, your monthly benefit gets an 8% boost -- and a permanent one at that.
Filing for Social Security at age 70 could make your retirement much less financially stressful. After all, if you're getting more money on a monthly basis, it gives you more freedom to spend on different expenses. But there's a less obvious benefit to claiming Social Security at age 70 that you should also know about.
You might end up with a boosted nest egg, too
If you're waiting until age 70 to file for Social Security, it may mean that you're pushing yourself to keep working until those benefits start hitting your bank account. And a few extra years of work could do a lot of great things for your retirement savings.
For one thing, you may be in a position to keep funding your IRA or 401(k) plan while you're working later in life. So those additional contributions could build nicely on your existing balance. But leaving your nest egg alone for a few extra years could also result in a lot more money.
Let's imagine that your FRA for Social Security is 67, and that you have $500,000 socked away in savings. Let's also assume that at that point, you've shifted the investments in your portfolio to more conservative ones so that your retirement plan is giving you a 6% annual return, which is well below the stock market's average.
Even if you don't manage to add another dollar to your IRA or 401(k), if you leave your account untouched until age 70, your $500,000 balance will grow into over $595,000. That's a huge difference.
Patience can really pay off
Not everyone is in a position to delay Social Security until age 70. If you're no longer able to hold down a job, then waiting that long may not be feasible. And if your health is in notably poor shape, then you actually really shouldn't delay your filing until age 70, as that might mean ending up with less money from Social Security on a lifetime basis.
But otherwise, do consider the upside of claiming Social Security at age 70. Not only might you enjoy a boosted monthly benefit for life, but you might also end up with an even larger nest egg that lasts longer in retirement.
