Eligible American workers can file for Social Security benefits anytime between the ages of 62 and 70. While delaying benefits produces higher monthly checks, there are several good reasons why the average American doesn't wait. In fact, the most popular age to file for Social Security is 62 -- the earliest age possible.
With that in mind, here are three reasons for waiting as long as possible that simply don't make much sense.
1. "I'll get more money by waiting."
You may have heard that your monthly benefit will get larger if you wait longer to file, and that's absolutely true. In fact, if you were born in 1954 or earlier, you can get monthly checks that are 76% higher if you wait until 70 than if you file at 62.
However, keep in mind that the system is designed to give you the same total lifetime benefit, adjusted for inflation, regardless of when you file.
Basically, the Social Security Administration uses life expectancy tables to determine how many years the average person of a certain age will spend drawing benefits. For example, according to these tables, the average 62-year-old will live another 21.4 years, while the average 70-year-old will only live for another 15.3 years. When adjusting for the expected inflation rate going forward, this works out to roughly the same lifetime benefit amount.
So, don't think you'll get more out of Social Security if you wait. Unless you expect to live a substantially shorter or longer life than the average, it's all the same (in theory).
2. "I don't need the money just yet. I can wait to enjoy my retirement."
Now, I'm not referring to people who are still working after they reach the age of eligibility. Rather, this refers to retirees who stop working and choose to live a modest lifestyle in their first several years of retirement in order to allow their Social Security benefit to grow.
While this will result in higher monthly checks in the future, there are a couple of big problems with this strategy.
First, this forces retirees to deplete their retirement savings, such as their 401(k) or IRA, much faster than they would if they filed for Social Security. Your Social Security check will grow with inflation and cannot "run out," no matter how you spend your benefits now. The same can't be said of your other retirement savings, the preservation of which should be a priority, especially for newly retired people.
Second, the early years of most people's retirement will be their healthiest and happiest. So why deprive yourself if you don't have to? If you don't absolutely need the higher Social Security checks that waiting until 70 can provide, then I suggest enjoying your retirement right away. After all, you've waited your entire career for your retirement -- why not use that extra income to live it up while you still can?
3. "I'm still working at 66, so my benefits will be reduced."
It's a common misconception that working will lower your Social Security benefits, no matter what. In reality, the Social Security Administration separates beneficiaries into three categories when it comes to the effect of working:
- People collecting Social Security who will reach full retirement age after this year.
- People collecting Social Security who will reach full retirement age during this year.
- People collecting Social Security who are at or above full retirement age.
If you are in one of the first two categories, then the Social Security earnings test can indeed reduce your benefits if your earnings from work are above a certain threshold. However, it doesn't apply after you reach full retirement age. You can work and earn as much as you want, and it will have absolutely no effect on your Social Security benefits.
In other words, if you're 68 years old and you're entitled to a $2,000 monthly Social Security benefit, then you'll get no less than that amount even if you earn a million-dollar salary this year. So, don't let the fear of a benefit reduction due to earnings get in your way.
The bottom line on waiting until 70 for Social Security
Having said all that, there are some valid reasons you might want to wait until 70. For example, if you are in excellent health and have a history of longevity in your family, then waiting might be the best move. Or, if you're perfectly happy working until 70 and truly don't need the extra money, then it's fine to wait.
The bottom line is that there is no single "correct" age at which to file for Social Security -- it depends on you. Just don't let any of the three reasons I listed here influence your decision.
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