One of the trickiest retirement-related decisions you might have to make is figuring out when to sign up for Social Security. Your monthly benefit, based on your wage history, is yours in full if you file for it at full retirement age (FRA). That age is 66, 67, or somewhere in between, depending on your year of birth.
You can also sign up for Social Security ahead of FRA, and the earliest age to do so is 62. But for each month you file before reaching FRA, those monthly payments will be reduced permanently.
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On the flip side, it's possible to delay your Social Security claim past FRA. For each year you do, your monthly benefit will get an 8% boost.
Once you turn 70, you can't grow your monthly benefit any longer. But if you have an FRA of 67 and you claim Social Security at 70, you'll be looking at payments that are 24% higher -- for life.
And that begs the question: Is it worth it to sit tight for more Social Security income? Or should you accept a smaller benefit to get that money sooner?
It's not an easy decision to make
For many people, in order to be able to claim Social Security at age 70, they'll have to work until age 70. But that could prove challenging.
For one thing, you may not have the energy level at age 70 to deal with a grueling commute and demanding job. Even if your job isn't stressful, you may just reach a point prior to age 70 when you feel that you'd like to be done with it. Either way, waiting until age 70 to sign up for Social Security could mean making some sort of sacrifice.
Visualize what a higher monthly benefit might do for you
If you're interested in delaying your Social Security claim until age 70 for the financial upside but aren't sure if the sacrifice is worth it, figure out what boost you might snag. Then, imagine what you might do with the extra money. That could lead you to the right decision.
Let's say you're eligible for $2,100 a month in Social Security at an FRA of 67. Waiting until 70 to file will raise that monthly benefit to $2,604. All told, you're looking at about $500 extra per month, or $6,000 extra per year.
Think about what that kind of money might do for you. If you have a nest egg worth a few million dollars, it may not do that much. If you have minimal savings, however, an extra $6,000 a year could make it possible to take one really special overseas trip each year during retirement. Or it could give you the leeway to outsource more of your home maintenance so you're able to stay in your house without worrying about handling the work.
You may also decide that the extra $500 a month Social Security pays you is money you'd like to gift to your adult children or start a college fund for your grandchildren. There are so many choices for putting that extra money to good use. And figuring out what a boosted benefit might do for you could help you decide if delaying your claim is worth doing.
Ultimately, you may decide to file for Social Security at FRA or even before, and that's not necessarily a poor choice. But before you make your decision, make sure you understand what you have to gain by delaying Social Security until age 70.
