There are a number of difficult decisions you might have to make in the context of retirement planning. Should you downsize your home? Should you do a Roth conversion to avoid RMDs? And when should you start taking Social Security?
You have plenty of choices when it comes to filing for benefits. The earliest age you can sign up for Social Security is 62. From there, you’re free to file at any point in time.
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If you wait until full retirement age, which is 67 if you were born in 1960 or later, you’ll get your monthly Social Security benefits without a reduction. If you delay your claim past full retirement age, you’ll get an 8% boost for each year you wait until you turn 70.
For some people, the idea of delaying Social Security is unappealing despite the guaranteed income boost. But ignoring that delayed filing strategy is a move you might sorely regret — especially if you’re married.
Smaller benefits might limit your options
It’s not so uncommon to claim Social Security early (meaning before full retirement age) and regret it once you start seeing smaller monthly benefits. But even if you file at full retirement age, you may regret not waiting until 70 if you don’t have a lot of retirement savings. This holds true whether you’re married or not.
Of course, the more savings you bring into retirement, the lower your chances might be of your nest egg running out of money. But even if you save a bundle and manage IRA or 401(k) withdrawals carefully, poor market conditions and the wrong investments could put you at risk of depleting your savings at some point in your lifetime.
Social Security, on the other hand, is a guaranteed income source for life. And the larger your monthly benefits are, the more options you might have.
Larger checks could make it possible to outsource home maintenance, travel to new countries, and do other things that make your retirement more comfortable and enjoyable. And that’s on top of the enhanced financial stability. But the less money you receive each month from Social Security, the more hard choices you might have to make — things like passing up travel opportunities or putting off roof repairs because money may be tight.
Smaller benefits might hurt your spouse
If you’re married, here’s where not delaying your claim until 70 might really come back to haunt you. If you’re the higher earner in your household and you pass away first, your spouse should be entitled to survivor benefits from Social Security. Those benefits should equal the amount you received while you were alive.
If you delay your Social Security claim until 70, you could not only boost your household income while you’re alive but also leave your spouse with larger survivor benefits in your absence. And that’s a particularly important thing if you don’t have the largest nest egg.
Delaying is often the smarter choice
It’s easy to see why delaying Social Security may be difficult. Unless you have a boatload of savings, delaying your claim until 70 could mean having to work until 70. You may want to retire considerably earlier, even if you enjoy what you do.
But while delaying Social Security may require some patience and sacrifice, it could put you in a much stronger position throughout retirement. And it could also end up being a lifeline for a lower-earning spouse who outlives you.
Rather than say that a delayed claim is off the table, think about the upside — and how much you might regret not boosting those monthly checks as much as possible. You may change your mind about when to file once you realize what you might be giving up.
