Many people have a single goal when claiming Social Security: to receive the largest possible monthly benefit. And it’s easy to see why that’s a goal you’d want to chase.
After decades of paying into Social Security, snagging larger checks could make for a more comfortable retirement. But focusing on your monthly benefits only is a mistake you might sorely regret in the course of claiming Social Security.
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Your lifetime paycheck matters, too
You have different choices when it comes to claiming Social Security. You can file for benefits at any point once you turn 62. But if you want those benefits without a reduction, you’ll need to wait until full retirement age, which is 67 for anyone born in 1960 or later.
You can also delay your Social Security claim past full retirement age to boost your checks. Each year you wait until you turn 70, your monthly benefits receive an 8% boost.
You might assume that delaying Social Security until age 70 is the smartest move since it’ll give you the largest monthly boost. What you may not realize, though, is that it won’t necessarily give the largest lifetime boost.
Let’s say you delay Social Security until age 70 but only live until 74. Despite getting larger payments each month, you may end up with a much smaller lifetime benefit compared to filing earlier.
On the flip side, filing at 62 will shrink your monthly checks. But if you live until 74, you’ll have gotten 12 years of benefits — as opposed to just four years of benefits if you waited until age 70.
That’s why it’s important to calculate your break-even age — the age where your total benefits received based on a younger and older filing age are equal. If you expect to live beyond that age, delaying Social Security makes sense. If you don’t, an earlier claim could be the financially smarter choice.
Your health and family history should help guide your decision
Of course, the tricky thing about using the break-even age strategy is that you don’t actually know how long you’ll live. But you can use your health and family history as a starting point.
If you have medical problems and your parents passed away in their mid-70s, filing for Social Security on the earlier side could be a wise choice. If your health is great and your parents are still alive and pushing 90, delaying could be the smarter move. If you’re really not sure what to do, filing at full retirement age might be a good compromise.
The point, though, is to focus not just on monthly income when making your decision, but also on lifetime income.
