There’s a reason so many older Americans opt to claim Social Security at 62. That’s the earliest age you can file for benefits. And when you have the prospect of a monthly check staring you in the face, it’s hard to say no.
But as tempting as it may be to claim Social Security at 62, you’ll often hear that you’re better off waiting until full retirement age (FRA) or even beyond. At FRA, you’re entitled to your monthly benefits without a reduction. And for each year you claim Social Security after full retirement age, until age 70, your benefits get an 8% boost.
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You might think that delaying Social Security is risky, though. For one thing, it’s not a secret that the program is facing financial troubles. And also, if you don’t end up living a long life, you could short yourself on total Social Security income by delaying your claim.
The truth is that delaying Social Security does carry some risk — not because the program is at risk of going broke, but because you don’t know how long you’ll live. But it’s also important to balance that risk with the upside.
Why waiting could pay off
If you delay Social Security past FRA, you’ll get larger monthly checks but fewer individual payments due to having to wait. If you don’t live a very long life, you could easily end up with less money in total.
But if you live well into your 90s, a delayed Social Security claim could put a lot more money in your pocket in your lifetime. More so than that, it could give you peace of mind. That’s because those monthly benefits are guaranteed to come your way each month you’re alive. Your savings, by contrast, could run out.
Let’s say you’re eligible for $2,400 a month in Social Security at your full retirement age of 67. If you wait until 70 to take benefits, you’ll get $2,976 per month instead. But you’ll also miss out on 36 payments.
At age 82 and 1/2, you break even under both scenarios — meaning you get a total of $446,400 in lifetime income whether your filing age is 67 or 70. But when you live longer, things get very interesting.
At age 85, filing for Social Security at 70 gives you over $17,000 more in lifetime benefits than filing at 67. At age 90, that number increases to almost $52,000. And if you end up living until 95, claiming at 70 puts an additional $86,400 in your pocket.
These are very meaningful numbers. And they’re worth considering, especially if you don’t have known health issues that are likely to shorten your lifespan.
There are other benefits to consider, too
Not only might delaying Social Security give you larger payments each month, but remember that benefits are eligible for an annual cost-of-living adjustment. The more money you’re eligible for, the more value those raises should add — and the easier it might be to keep up with inflation.
Furthermore, if you’re married, delaying Social Security gives you the perk of larger survivor benefits. That’s something to account for if you’re the higher earner in your household and you expect to pass away before your spouse.
Let’s say you only have modest retirement savings and need Social Security to make ends meet. If you delay your claim and boost your monthly checks, even if you don’t live long enough to score a larger lifetime benefit because of that, you may end up leaving your spouse with much larger payments.
So all told, you might come out ahead financially at the household level if not at the individual level.
It’s a tough choice to make
There’s no question about it — deciding when to claim Social Security isn’t easy. And it’s natural to worry that delaying your benefits is risky.
But while waiting does carry some risks, it also offers a lot of rewards. The key is to decide if the peace of mind that comes with guaranteed larger benefits is worth it.
