Once you start collecting Social Security, you'll be eligible for a specific benefit each month. And you may be eager to boost that benefit as much as possible.
To that end, there's a really simple solution, at least in theory. All you need to do is delay your Social Security claim beyond full retirement age (FRA). For each year you do, up until your 70th birthday, your benefit gets to grow. And if your FRA is 67 and you claim Social Security at 70, you'll snag a 24% boost to your monthly benefit for life.
Getting more money from Social Security on a monthly basis might seem like a great thing for your retirement. But you should know that holding off on filing your claim also comes with some risk.
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Will you come out ahead financially in your lifetime?
It's natural to focus on growing your monthly benefit in the context of Social Security. But what makes even more sense is to aim for the highest lifetime benefit possible. And delaying your Social Security claim may not yield that result.
Remember, when you delay your claim, you lose out on what could be many months of payments. So if you don't end up living a long enough life to make up for those missing payments, you could end up losing out financially all in.
Let's say you delay your Social Security claim until age 70 but end up passing away at 72. At that point, you're hardly getting any benefits, so a larger monthly payday isn't all that helpful.
Now if your health is great going into retirement, you may feel confident that you'll live a reasonably long life. And you may decide to delay your Social Security claim in light of that. But if your health is iffy, then holding off on collecting Social Security may be risky.
Your decision starts with your break-even age
If you're not sure whether delaying Social Security is the right choice for you, start by figuring out your break-even age. That's the age at which you'd collect the same total lifetime benefit based on different filing ages.
Let's say you're torn between an FRA of 67 and age 70. Let's also assume you're looking at a monthly benefit of $2,400 at FRA.
In this case, you'll break even at age 82 1/2 with a lifetime payout from Social Security of $446,400. If you live until age 83, a filing at age 70 puts you ahead by $3,456 in your lifetime.
Now without a crystal ball, you can't say definitively that you'll live until 82 1/2. But if your parents lived until their late 80s and you're in even better health than they were as retirement approaches, you might use that as a reason to hold off on filing your claim.
Plus, in this scenario, if you were to live until age 90, a Social Security filing at age 70 would leave you with an additional $51,840 of lifetime income. That's a pretty sweet payoff for waiting.
All told, delaying your Social Security claim is a risk. And there's no getting around that. Whether it's a risk worth taking will have to depend on your specific situation.
