The Big Question You Need to Ask Before Delaying Social Security

The great thing about Social Security is that you're allowed to sign up for benefits at different ages. You can file as early as age 62 or delay your filing until the age of 70. Technically, you can claim Social Security beyond age 70, but there's no financial incentive to hold off on filing past that point.

Delaying Social Security will result in a higher monthly benefit for life. If your full retirement age (FRA) is 67 and you decide to sit tight and claim benefits at age 70, you'll end up with a monthly payday that's 24% higher — for life.

Tempting as that may be, delaying benefits doesn't always make sense. Before you make the decision to hold off on claiming Social Security, you'll need to answer one sobering question.

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Will I live long enough for delaying benefits to pay off?

For each year you hold off on claiming Social Security past FRA, your benefits will grow 8%. This means you can score a maximum boost of 24% to 32% by filing at age 70, depending on your specific FRA.

While holding off on filing might give you more money from Social Security on a monthly basis, it won't necessarily give you more money on a lifetime basis. And it's the latter point you'll need to contemplate before signing up for benefits late.

To see if delaying your filing makes sense, you'll need to determine your break-even point. That's the age at which you'll have received the same total amount of income from Social Security based on filing at FRA, versus filing later on.

If your FRA is 67 and you're entitled to a $1,600 monthly Social Security benefit at that point, but you delay your filing until age 70, your break-even age will be 82 1/2. At that age, you'll have collected a total of $297,600 from Social Security in either scenario.

As such, if you think you'll live longer than 82 1/2, then delaying your filing makes sense. But if you're not confident that will be the case, then you may want to sign up for benefits sooner.

In our example, if you were to live until age 80, you'd come out $11,520 ahead in your lifetime by virtue of signing up for Social Security at age 67, versus waiting until 70. On the other hand, waiting until age 70 will leave you $11,520 richer if you live until age 85.

What's the right call?

Without a crystal ball, there's no way to know how long you'll live, so to some degree, delaying Social Security is always a bit of a gamble. But if your health is strong in your 60s and you have a family history of longevity, you may want to consider delaying your filing beyond FRA. On the flip side, if your health is poor, you may want to file at FRA or even earlier — maybe even as early as age 62.

Your ultimate goal should be to collect as much money from Social Security as you can in your lifetime. Delaying your filing may allow you to do so, but you'll need to approach that decision with confidence. And if you aren't sure, filing sooner could make more sense.

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