Many people decide to wait until they reach their full retirement age (FRA) before applying for Social Security. In 2024, retirees will reach that milestone sometime between age 66 and 67. So, the Social Security Administration will see a lot of 66-year-olds applying for retirement benefits this year.
Many find waiting until full retirement age to be a solid compromise between claiming as soon as possible at age 62 or waiting until benefits max out at age 70. You're not claiming early, so there's no penalty, but you're not delaying your claim, so there's no added amount, either. It's also the point at which you can maximize your spousal benefits if you're claiming them instead of your personal retirement benefit.
But there are several downsides to claiming at 66. Here's the unfortunate truth.
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You could receive more benefits by waiting
While you'd have to wait up to an additional four years, claiming at age 70 often results in more total payments from Social Security over your lifetime.
For each month you delay beyond your full retirement age, your Social Security check increases by about 0.67%. So, people born in 1957, with a full retirement age of 66 1/2, could receive up to 28% more in their monthly check than if they claim the month they reach full retirement age. Likewise, those born in 1958, with a full retirement age of 66 and 8 months, could receive an additional 26.67% every month.
Of course, you'd have to live long enough to justify delaying your benefits. But for the majority of 66-year-olds, that's a good bet. Recent data from the CDC shows the average life expectancy of a 65-year-old is 83 years and 10 months. The break-even age for delaying benefits is 82 1/2. So, if you're in average or better health, it's likely worth delaying a bit longer even though you'll forego some benefits now.
There's a notable exception. If you plan to collect spousal or survivor benefits, you don't get any benefit for delaying beyond your full retirement age. If that's the case, claiming at full retirement age is usually an optimal decision.
You may leave your widow or widower with less
If you were the high earner of the family, you have another reason to delay your benefits a bit longer.
If you pass away before claiming Social Security, your spouse is eligible to claim up to 100% of what you would have received at full retirement age. However, if you've already claimed, your spouse receives up to 100% of what you were receiving. In other words, they can benefit from you delaying your Social Security application beyond full retirement age.
Importantly, the survivor benefit replaces your spouse's own benefit, so there's no double dipping. If you think your spouse might not be able to get by on the sub-maximal benefit, you may want to wait a few extra years and get the biggest monthly benefit check possible.
If you're in a position where you need to think about the support of a spouse or family after you've passed away, it typically makes sense to delay as long as possible.
You still have to pay for Medicare somehow
If you're 65 or older and no longer working, you'll likely want to enroll in Medicare for health coverage. Most retirees are automatically enrolled in the government program since they already collect Social Security benefits by age 65. But if you're not planning to collect benefits until at least age 66, you'll need to enroll manually.
On top of that, you'll also be responsible for paying your premiums out of pocket. The Social Security Administration usually deducts Medicare Part B premiums from retirees' monthly benefits checks. But since you won't have a check to deduct from, you'll have to pay those premiums directly.
For 2024, Medicare Part B premiums cost $174.70 per month. Those with incomes more than $103,000, or $206,000 for joint filers, will have to pay more.
If you're still working and get insurance through your employer, it's a non-issue. You don't need to sign up for Medicare. But retirees who are simply delaying Social Security until full retirement age need to budget for Medicare, as it can be a substantial expense.
