This article was updated on May 31, 2016.
Many people plan to wait as long as possible to begin collecting Social Security for one obvious and understandable reason: The monthly checks get higher the longer you wait.
Under the current laws, you can wait until you turn 70 to begin receiving benefits. However, waiting that long might not be such a good idea after all. Here are three reasons from our experts why it may be a better idea to start collecting your benefits sooner.
The massive financial gain you may expect from waiting until age 70 to start collecting Social Security is mostly an illusion. Your monthly check will be bigger, but you'll be collecting far fewer checks in your lifetime.
Let's get into some specifics. The Social Security Administration assigns each of us a "full" retirement age, which is 66 or 67 depending on when you were born. We can start collecting benefits as early as age 62, but they'll be smaller checks. We can also delay our benefits until age 70, allowing our eventual benefit to grow by about 8% for each year we delay. But remember: There are 36 months between age 67 and age 70, and 96 months between age 62 and 70. That's a whole lot of Social Security checks.
Let's run through an example using the SSA's "quick calculator." Imagine you just turned 50 years old, having been born in January 1966, and you earn $60,000 annually. Below are the approximate monthly benefits you can expect at various retirement ages, along with the cumulative benefits you will have received at three different points. (You can visit the Social Security Administration's "my Social Security" page to look up your own estimated benefits.)
|Retirement Age||Monthly Benefit||Total Payments by Age 75||Age 80||Age 90|
You can see that the total benefits don't vary widely by age 80 -- and that the best age to start collecting depends on how long you live, which you can't know. The Social Security Administration itself says, "As a general rule, early or late retirement will give you about the same total Social Security benefits over your lifetime."
It could also be a huge mistake to wait until turning 70 to claim Social Security benefits if you plan to claim spousal benefits.
For those who are unfamiliar with them, spousal benefits allow you to use your spouse's earnings history rather than your own to claim Social Security benefits. However, your Social Security spousal benefits are limited to 50% or less of your spouse's primary insurance amount, depending on your age when you claim them.
As with regular Social Security benefits, if you claim spousal benefits early, your benefit is reduced. If you claim spousal benefits at the earliest possible age of 62, you will only receive 32.5% of your spouse's primary insurance amount.
However, unlike regular Social Security benefits, spousal benefits do not continue to grow if you defer them past your full retirement age. Spousal benefits max out at 50% of your spouse's primary insurance amount when you reach your full retirement age.
Therefore once you reach your full retirement age, every month you wait to claim means lost money for you. Waiting until you turn 70 to take Social Security spousal benefits is a huge mistake, as it means you will have missed out on four years of checks you could have been receiving, and you'll have nothing extra to show for it.
If simply maximizing the dollar amount of Social Security benefits you'll receive over your lifetime isn't exactly what you have in mind, then it can be a big mistake to wait until age 70 to start taking benefits. Although most analysis of Social Security benefits assumes that you'll value the money you receive early in retirement only slightly more than the benefits you'll get years down the line, many people expect to get the most out of retirement in the years from 62 to 70. This is when many retirees take advantage of their relative youth and newfound free time to pursue long-deferred dreams, such as traveling and taking up new hobbies. In exchange for the ability to fund these early-retirement adventures, many retirees are willing to accept a potentially smaller lifetime benefit, even if it also means accepting a declining standard of living in their later years.
This is particularly true for single Social Security recipients, who don't need to consider the impact of their decisions on spouses who might survive them. As Selena points out, your lifetime benefits are a factor of when you claim Social Security and how long you live, so if you anticipate living to your life expectancy, it's rational to front-load your Social Security, so long as you're comfortable with the future consequences.
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