One neat thing about Social Security is that it gives you a choice when it comes to claiming benefits. You’re entitled to your full monthly benefit based on your wage history at full retirement age, or FRA. FRA kicks in at 66, 67, or somewhere in between — it depends on the year you were born.
However, you’re allowed to sign up for Social Security beginning at age 62. Filing before FRA will result in reduced benefits, but hey, at least the option exists. And on the flip side, you can delay your filing past FRA and boost your benefits in the process. For each year you hold off on claiming Social Security up until age 70, your benefits grow 8%.
For many people, the idea of waiting until 70 to collect Social Security is unappealing. That’s because many people don’t want to wait that long to retire, but they can’t retire without having access to their benefits. I, however, really hope to be in a position to claim Social Security at 70 for one big reason.
Who wants a guaranteed 8% return?
I’m not banking solely on Social Security to fund my retirement. Instead, I’ve been diligently socking money away in a retirement plan in an effort to build my own nest egg.
My savings, meanwhile, are invested across a range of assets designed to help my money grow. Right now, my investment mix focuses heavily on stocks since I’m not close to retirement age. In time, I may need to adopt a more conservative approach in my portfolio.
Either way, I hope my savings will generate a decent return so my balance increases through the years beyond the amount of money I contribute from my earnings. But unfortunately, there’s no guarantee that my investments will perform the way I hope they will. And if my portfolio underperforms, I may need to make big changes to my retirement plans to compensate.
That’s why I find the idea of claiming Social Security at 70 so appealing. For each year I delay my filing past FRA (which, for me, is 67), I get a guaranteed 8% return on my money. If I wait until age 70 to sign up for benefits, I get a 24% boost so that if I’d normally be entitled to $2,000 a month from Social Security at FRA, I’d get $2,480 instead. That’s a really nice income boost to lock in.
Waiting could pay off
To be clear, not everyone can wait until 70 to file for Social Security. If you’re forced out of a job at an earlier age due to layoffs or health issues, you may have to claim benefits sooner to stay afloat financially.
But if you have the option to wait until your 70th birthday to sign up, then doing so could really pay off. And if you like the idea of a guaranteed income boost and return on your money, then sitting tight and claiming Social Security at 70 is a plan worth pursuing.
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