Deciding when to claim Social Security benefits is an important decision that can affect your financial security during retirement. Many people wonder if waiting until age 70 to start receiving benefits is the best strategy. Since Social Security is a critical source of income for retired individuals, understanding the pros and cons of delaying your claim is essential.
This article takes a close look at what happens when you wait to claim Social Security until age 70. We’ll break down how it impacts your monthly payments, lifetime benefits, and overall retirement plans. Whether you’re young and planning ahead or nearing retirement, this guide can help you make a well-informed choice.
What Happens if You Claim Social Security Early?
This Article Includes
- 1 What Happens if You Claim Social Security Early?
- 2 The Benefits of Waiting Until Full Retirement Age
- 3 Why Consider Waiting Until Age 70 to Claim Social Security?
- 4 How Waiting Affects Your Lifetime Benefits
- 5 Pros of Waiting Until 70 to Claim Social Security
- 6 Cons of Waiting to Claim Social Security
- 7 How to Decide What’s Best for You
- 8 Tips for Younger People Planning Ahead
- 9 Conclusion: Balancing Risks and Rewards
The earliest age to claim Social Security benefits is 62. If you choose to claim at this age, your monthly benefit amount will be reduced compared to your full retirement age benefit. This reduction is permanent, which means your paycheck from Social Security will be smaller throughout your retirement years. While claiming early might seem attractive for immediate income, it can lead to lower overall lifetime benefits, especially if you live a long life.
The Benefits of Waiting Until Full Retirement Age
Your full retirement age (FRA) is typically between 65 and 67, depending on your birth year. If you wait until your FRA to claim benefits, you will receive the full monthly benefit you are entitled to based on your earnings history. Claiming at full retirement age avoids any penalty for early claiming, but you won’t gain the extra bonus that comes from waiting even longer.
Why Consider Waiting Until Age 70 to Claim Social Security?
One of the biggest reasons people wait until age 70 is to maximize their monthly Social Security payments. For each year you delay claiming benefits beyond your full retirement age, your benefit increases by about 8% until you reach 70. This increase is called delayed retirement credits. By waiting, you can earn a significantly larger monthly benefit, which can make a big difference during your later years in retirement.
How Waiting Affects Your Lifetime Benefits
Maximizing your monthly benefit sounds great, but it’s important to consider your overall lifetime benefits. If you claim late and live a long time, you will likely receive more money over your lifetime. However, if you need the money earlier or have health issues, it might be better to claim sooner. Calculating the break-even point—when the total benefits received from waiting surpass those from claiming early—can guide your decision.
Pros of Waiting Until 70 to Claim Social Security
First, waiting increases your monthly income during retirement, giving you more financial security, especially in your 70s and beyond. It protects against inflation and helps cover increased health care costs with rising age. Second, it can provide a higher survivor benefit to your spouse or dependents if you pass away. A larger benefit means better support for your family.
Cons of Waiting to Claim Social Security
On the downside, waiting means you must rely on other savings or income for longer before receiving Social Security. This may not be possible for everyone, especially if you retire early or face unexpected expenses. Furthermore, there is the risk of not living long enough to benefit fully from the increased payments. Personal health and family longevity history play a big role in this risk.
How to Decide What’s Best for You
Your decision depends on your financial needs, health, and retirement goals. If you have a steady income source or savings to cover expenses, waiting could be advantageous. Conversely, if you need money early to cover living costs, claiming sooner may be the prudent choice. Consider consulting with a financial advisor who understands the nuances of Social Security and your personal circumstances.
Tips for Younger People Planning Ahead
Even if you are young, it’s smart to understand how Social Security works now. Keeping track of your earnings history and knowing your full retirement age can help you plan better. Regularly checking your Social Security statements online will ensure your records are accurate. Early planning can put you in control of your future financial security.
Conclusion: Balancing Risks and Rewards
Waiting until 70 to claim Social Security has clear benefits but also some risks. The decision should be based on your health, financial situation, and retirement plans. The increase in monthly benefits from waiting can provide a stronger safety net, but only if you live long enough to enjoy it. Understanding these trade-offs will help you make the right choice for your unique needs.
