Whether you kick off retirement with $500,000, $1 million, or $5 million, you may have a nagging fear of your money eventually running out. And that's understandable.
To prevent that from happening, it's important to come up with a strategic withdrawal rate for your savings. But another great way to stretch your nest egg is to get as much money as you can out of Social Security each month. The larger your monthly benefits are, the less you should have to tap your IRA or 401(k) plan, thereby helping that money to last.
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Perhaps the easiest way to grow your monthly Social Security benefits is to delay your claim until age 70. For each year you hold off on filing for benefits beyond full retirement age, your monthly checks get a permanent 8% boost, up until 70.
But while filing for Social Security at 70 guarantees you larger benefits for life, it's not a given that you'll be able to take advantage of this strategy. Here's why.
You need circumstances to align in your favor
It's certainly not a bad idea to plan on claiming Social Security at age 70. But whether you'll be able to do so might hinge on your ability to keep working that long.
A lot of people aren't comfortable living off of their savings in the absence of Social Security. So if you're looking to file for benefits at age 70, you might have to continue working until age 70.
Unfortunately, though, there's no guarantee that you'll be able to stay in the workforce until 70. You may have to retire sooner than that due to factors such as:
- Being downsized out of a job
- Being forced to leave your job due to health issues
- Being forced to leave your job to take care of a spouse or other family member
Of course, even if you're unable to work until 70, you may be able to delay Social Security by tapping your nest egg. But unless you truly have a lot of savings, that may not be a reasonable plan.
And whether that plan works may also depend on the state of the stock market. If it's a bad time to be liquidating assets in your portfolio, then you surely don't want to use your IRA or 401(k) as your sole source of retirement income for a period of time.
Be flexible with your filing decision
Claiming Social Security benefits at age 70 is a great way to score larger monthly checks for the rest of your life. And that could help alleviate a fair amount of financial pressure in retirement.
Just don't assume that being able to file for Social Security at 70 is a sure thing. It pays to be open to other filing scenarios in case your original plan doesn't pan out.
You may, for example, have to file for benefits at age 65 if you can't work full-time until 70. But in that case, you might also be able to supplement your Social Security checks with part-time work in retirement to effectively make up the difference between the benefit you're entitled to at 65 versus five years later.
You also may, depending on your situation, have to make some other financial changes in retirement, like having to spend money more carefully. It's important to be adaptable as you navigate retirement, especially in the context of Social Security.
You can make a plan as to when you'll claim benefits. But at the end of the day, your filing decision might have to boil down to circumstance more so than an actual strategy you came up with in advance.
