One neat thing about Social Security is that the program gives you a choice of filing ages. Once you turn 62, you can sign up to receive benefits at any time. But you won't get your full monthly benefit (the one you're entitled to based on your personal income history) until full retirement age (FRA) arrives. FRA is 66, 67, or somewhere in the middle, depending on the year you were born.
There's also the option to delay your Social Security claim past FRA. For each year you do, up until age 70, your monthly benefits grow 8%. So all told, you could end up with a monthly Social Security paycheck that's 24% to 32% higher than it would be at FRA by delaying your claim until the age of 70.
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I used to think that 70 was the optimal time to claim Social Security because of this provision. The way I saw it, at 70, you were guaranteed the highest possible monthly payday you could get. And that could work wonders for your financial stability as a retiree.
But I've since changed my mind about filing for Social Security at age 70. Here's why.
There are risks when you file for benefits at 70
It's true that age 70 is when you can snag the highest possible monthly benefit from Social Security based on your individual wage history. But filing at 70 doesn't necessarily give you the highest lifetime benefit.
A friend of mine has a father who's 72 years old and in poor health. She'll be thankful if he makes it to his 73rd birthday at this point.
Now I have no idea what age her father claimed Social Security at. But I do know that had he signed up at age 70, he would've lost out financially big time.
See, delaying Social Security until age 70 only makes financial sense if you'll live a reasonably long life beyond that point. And since none of us have the ability to see into the future, signing up for benefits at age 70 means taking a big risk. If you don't live very long past 70, you potentially give up a world of lifetime income.
Of course, if you enter retirement in great health, you can perhaps approach a late Social Security filing with more confidence than someone in poor health. But there are no guarantees. You could be in wonderful shape at age 67 only to fall ill a few years later. You just never know.
And it's not just a matter of passing away at a young-ish age to consider. Even if you end up living long enough to come out ahead financially in your lifetime by claiming Social Security at age 70, delaying your claim could also mean delaying certain goals, like traveling, self-publishing a novel, or opening up a café.
You might have the energy to do those things at age 66 or 67 but less energy to do them at 70. So all told, claiming benefits at 70 isn't necessarily the savvy move I once thought it was.
Think through your options carefully
If you're someone who's approaching retirement with almost no savings, I'd urge you to consider delaying Social Security past FRA. In that situation, without a boost to your monthly benefits, you might land in a position where you truly can't pay your bills.
But if you have at least decent savings going into retirement, you may want to consider claiming Social Security at an earlier age than 70. While you may end up forgoing a higher monthly benefit, you won't necessarily end up with a lower lifetime benefit. And that way, you might also get to enjoy your life more when you're young enough to do the things you've always dreamed of.
