When it comes to Social Security, there's a tricky decision to make. You could start collecting benefits as early as age 62. But if you don't wait for full retirement age, those monthly checks will be subject to a steep reduction. Full retirement age is 67 for anyone born in 1960 or later.
You can also delay Social Security past full retirement age for boosted checks. For each year you wait, your benefits increase 8% on a permanent basis.
Age 70 is when those delayed retirement credits stop accumulating. But all told, you could end up with a 24% boost to your monthly checks if your full retirement age is 67 and you hold off until 70.
That's not the only reason to delay your claim until 70, though. Here are a couple of less obvious but equally important reasons why filing for Social Security at 70 could be an extremely smart financial decision for your retirement.
1. You'll get better inflation protection
Social Security benefits are eligible for a cost-of-living adjustment, or COLA, each year. The purpose of COLA is to help benefits match inflation.
COLAs are given out on a percentage basis. This year, for example, all Social Security benefits were eligible for a 2.8% increase.
But the larger your monthly benefit is to begin with, the more money each COLA should put in your pocket. A 2.8% COLA applied to a $2,480 check, for example, is worth more than a 2.8% COLA applied to a $2,000 check.
Now there are other ways to beat inflation in retirement, such as choosing savvy investments. But if you want added protection, claiming Social Security at 70 is an option worth considering.
2. You can set your spouse up with larger survivor benefits
If you're the higher earner in your household and you end up passing away before your spouse, they'll typically be entitled to survivor benefits that are the equivalent of the monthly checks you're eligible for each month. For example, if your monthly benefit is $1,800, your spouse's survivor benefit should be the equivalent, not including any COLAs that come through.
If you file for Social Security at 70 and boost your benefits, you'll leave your spouse with more money to collect in retirement if they end up outliving you. That's important because if your spouse needs long-term care or other assistance and you're not around to provide it, a larger monthly benefit could make it easier for them to meet their needs.
Filing for Social Security at 70 isn't the right choice for everyone. But it's a strategy worth considering if you like the idea of larger benefits, more money when COLAs come through, and added long-term protection for a surviving spouse.
