One pretty neat thing about Social Security is that when you're eligible for benefits, you'll get a choice of filing options. You can claim Social Security as soon as you turn 62. However, you're not entitled to your complete monthly benefit, based on your personal income history, until you reach full retirement age, or FRA. That age is 66, 67, or somewhere in between, depending on when you were born.
If you claim Social Security ahead of FRA, your monthly benefit will be reduced -- for life. On the flip side, if you delay your filing past FRA, your monthly benefit will get a boost -- also for life.
That boost comes in the form of delayed retirement credits. And those credits can increase your Social Security benefits by 8% for each year you delay your filing past FRA.
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However, once you turn 70, you'll lose the option to continue accruing delayed retirement credits. That's why 70 is the unofficial "final age" for claiming Social Security. If you're considering delaying your filing beyond that point, you may want to redo that plan.
It only pays to wait so long
If you have an FRA of 67 and wait until age 70 to claim Social Security, you can snag a 24% boost to your monthly benefits. That's huge. And frankly, if you're nearing retirement without much savings, planning to delay your filing until age 70 makes a lot of sense.
What doesn't make sense, though, is signing up for Social Security after age 70, since there's no financial incentive to do so. It would be nice if Social Security were set up to automatically enroll beneficiaries on their 70th birthdays if they haven't signed up already, but that's not how the current system works.
What happens if you don't file for Social Security until after your 70th birthday? It depends on how long you wait.
If you claim Social Security within six months of turning 70, you won't lose out on any income, since the program will pay up to six months of retroactive benefits. But if you file beyond that point, you may end up out of luck.
Know the rules
In a recent MassMutual survey of older Americans, only about half of respondents knew that delayed retirement credits stop accruing at age 70. It's important to read up on Social Security's many rules so you're able to come up with a filing age that makes financial sense. And if you're getting pretty close to retirement, that's a task you should prioritize.
Once you work through your filing options, you might get a better sense of what monthly benefit you'll be in line for from Social Security. From there, you can assess your nest egg to make sure you'll be ending your career with enough money.
If not, you may need to make plans to delay retirement a bit. But the sooner you have that information, the more sound a decision you can make.
