As you approach retirement, one of the most important decisions you'll face is when to claim your Social Security benefits. While many retirees are eager to start collecting as soon as they’re eligible, a growing number of people are considering the benefits of waiting until age 70. This strategy offers the promise of a higher monthly check, but it’s crucial to evaluate both the advantages and the potential drawbacks to determine what’s best for your unique situation.
The Pros of Waiting Until 70
Increased Monthly Benefits
The most compelling reason to delay claiming Social Security until age 70 is the increase in your monthly payment. For every year you wait beyond your full retirement age (typically 66 or 67, depending on your birth year), your benefits grow by approximately 8% annually until you turn 70. This can result in a significantly larger monthly payment, providing a solid financial foundation during your later years when you may need it most.
Longevity Insurance
If you anticipate living a long life, waiting until 70 can be especially advantageous. The higher monthly payments can help cover long-term healthcare expenses or other rising costs, reducing the risk of outliving your savings. Think of it as a way to hedge against the financial uncertainties that come with a longer lifespan.
Spousal Benefits
Delaying your benefits can also benefit your spouse, especially if they earn less. Should you pass away, your spouse can claim your higher benefit amount as a survivor benefit. This can be a game-changer for their financial security, particularly if they depend on your Social Security income to cover essential expenses.
The Cons of Waiting Until 70
Delayed Gratification
Waiting until 70 means you’ll need to rely on other income sources to cover your expenses in the interim. For some, this might mean withdrawing more from retirement savings than anticipated, which could strain your financial resources early in retirement.
Health and Longevity Uncertainty
While delaying benefits makes sense if you expect to live longer than average, life is unpredictable. If health issues arise or you have a shorter life expectancy due to family history or other factors, waiting might not pay off. The reality is that you can only benefit from the higher payments if you live long enough to enjoy them.
Opportunity Cost
The money you forgo by waiting could have been used for other purposes, such as investing or simply enjoying life. Starting benefits earlier might allow you to take trips, pay down debt, or assist family members while you’re still in good health. Depending on how you use the money, the value of starting sooner could outweigh the long-term benefits of waiting.
Financial Consequences for You & Your Family
When deciding when to claim Social Security, it’s important to consider the broader financial implications for both you and your loved ones. Here are some key factors to think about:
Current Financial Needs
Take a close look at your current financial situation. Do you have enough savings, investments, or other income sources to cover your expenses if you delay Social Security? If not, waiting until 70 might not be realistic.
Impact on Retirement Savings
Bridging the gap until age 70 often means drawing down your retirement savings more quickly. This can leave you with fewer resources later in life. Be sure to have a plan in place to manage your expenses without jeopardizing your financial stability.
Family Health History
Your family’s health history and your own current health are important considerations. If there’s a likelihood you won’t live long enough to benefit from delayed payments, claiming earlier might make more sense.
Spousal Considerations
For married couples, the timing of your benefits has a ripple effect. Discuss the decision with your spouse to ensure it aligns with both of your financial goals. Remember, your decision could significantly affect their financial situation, particularly if they rely on survivor benefits.
Making the Right Decision
At the end of the day, the decision of when to claim Social Security benefits is deeply personal. It depends on your financial circumstances, health status, and retirement goals. Consulting with a trusted financial advisor can provide clarity and help you tailor a strategy that aligns with your unique needs.
By thoughtfully weighing the pros and cons, you can make a well-informed choice that maximizes your financial security and supports your retirement dreams. Whether you choose to claim early or wait until 70, the key is to have a plan that reflects your priorities and ensures peace of mind for the years ahead.
