Timing is everything. And that's true in pretty much every situation. The adage is definitely applicable when it comes to Social Security retirement benefits.
Some believe claiming benefits as early as possible at age 62 is the best move. Others want to hold out until they reach their full retirement age. I understand their perspectives. But here are three reasons why I don't plan to claim Social Security until age 70.
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1. I can retire without Social Security
Arguably the most important reason I plan to wait until age 70 to claim Social Security is that I can retire comfortably without the federal program's retirement benefits. Don't get me wrong: It would be nice to have the extra retirement income that Social Security provides before I turn 70. However, I shouldn't be too inconvenienced by waiting.
I'll forever be grateful for the advice a manager gave me in my first job after graduating from college. Actually, "advice" might be too mild of a word. He strongly urged me to contribute enough to my 401(k) plan to receive the company match. I did as he said and continued to do so throughout my career with other employers as well. Saving early and consistently with the "free money" from company matches has probably been the best financial move I've ever made.
It's helpful that I worked with one employer long enough to be 100% vested in its pension plan. This pension will make it easier for me to retire without Social Security benefits (temporarily).
I also love what I do. Unless artificial intelligence (AI) replaces my job or some other unforeseen development forces me to retire early, I plan to work well into my 60s.
2. I like the guaranteed return from waiting to claim benefits
Does the early retirement penalty factor into my decision about when to claim Social Security benefits? Absolutely. So do the delayed retirement credits available for those who wait to claim benefits after reaching their full retirement age.
If I retire at age 62, my monthly Social Security benefit will be significantly lower than if I held off until age 67. Waiting until my full retirement age would boost my Social Security check by nearly 43%, or roughly 8.5% per year on average. If I delay claiming benefits until age 70, my Social Security check will increase another 24% (8% per year).
Could I make more from investing? Maybe. However, there have been plenty of eight-year periods in which stocks didn't achieve average annual returns of 8%. The closer I get to retirement, the less risk I'm willing to take. A guaranteed annual return of at least 8% over eight years sounds attractive to me.
3. I expect my longevity will be above average
Waiting until age 70 to claim Social Security retirement benefits wouldn't make sense if I expected to live only a few years beyond then. But I'm cautiously optimistic that won't be the case.
The average life expectancy for a U.S. male age 62 is 19 years, according to the Social Security Administration's actuaries, putting the expected longevity at 81. The average life expectancy for a 67-year-old man is 15.6 years, putting the expected longevity at nearly 83. Both are above the breakeven age for waiting until 70 to claim Social Security benefits, which is 80.4.
I'm in good health. Many of my older relatives lived into their late 80s and 90s. Some of them lived past 100. I think there's a pretty good chance that my longevity will be above average.
Should you wait until 70 to claim Social Security?
There isn't a one-size-fits-all answer about when to claim Social Security retirement benefits. Just because I have what I believe are good reasons to wait until age 70 doesn't mean that you should do so.
However, the factors I considered are ones you'll want to take into account. Determine if you can financially retire without relying on Social Security benefits. Think about the financial trade-offs you'll make if you claim Social Security sooner. Consider your health and expected longevity.
In addition, seriously think about your priorities. Perhaps Social Security would enable you to retire earlier and do things you've always wanted to do. That could be appealing to you even if your overall retirement income is lower than it might otherwise be. Timing might be everything, but money isn't.
