Many financial experts recommend waiting until the age of 70 to claim Social Security, and with good reason. Delaying increases your monthly income and gives you a good chance to earn the maximum lifetime benefits — although whether that happens or not depends when you hit your break-even point.
Unfortunately, if you're planning to claim Social Security at 70, there's a very real chance you may need to rethink that. Here are a few reasons why this plan may not be a practical one.
1. You may not be able to wait until 70 to retire
The sad reality is, many people who want to work late in life aren't able to do so. Health issues can get in the way of staying on the job, as can family needs or a lack of available work opportunities.
If you're unable to continue working due to circumstances outside your control, there's a very real chance you will have to start Social Security benefits well before the age of 70. That's because most people won't be able to generate enough income from other sources to be in a financial position to retire without starting their Social Security checks.
2. You may put your savings at risk if you delay
If you delay claiming Social Security, you'll need to get money from another source to support yourself. If you can't work or you can't earn enough money to fund your lifestyle, you'll likely need to rely on income from your 401(k), IRA, or other retirement savings account.
Unfortunately, if you don't have Social Security benefits to count on, you may end up taking too much money out of your savings accounts too early. This could lead to running your accounts dry because you don't have enough invested to keep earning reasonable returns.
Following a safe withdrawal strategy, such as the 4% rule, could help ensure your savings doesn't run out. Unfortunately, maintaining that safe withdrawal rate could leave you with too little to live on without Social Security.
If you can't stick to your withdrawal strategy and you run out of savings, you'll be in a much worse position than if you'd just claimed Social Security early to preserve your nest egg. That's because it is very difficult to live on Social Security benefits alone since these benefits are intended to replace only around 40% of pre-retirement income while most retirees need 80% or more.
Will you need to rethink claiming Social Security at 70?
If you're currently a younger worker planning your retirement around claiming Social Security at 70, think about changing course. Assuming an earlier claiming age, even if you hope to wait, allows you to more accurately estimate how much supplementary savings you may need. If you end up being able to delay, you'll just be left with extra money.
And if you're nearing retirement and struggling to find work or draining your savings account too fast, don't be afraid to change course. Waiting until 70 isn't right for everyone. Starting your checks sooner to preserve savings or enjoy life could be far more beneficial in the long run than any delayed retirement credits you're able to earn.
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