As a retiree, every dollar of income counts since you no longer have a paycheck to help support you. But while you want to maximize the money coming into your household each month, it can actually make sense to pass up eight full years of Social Security benefits.
Forgoing retirement checks for years may seem crazy, but in the end it could end up helping you out in important ways.
Why would you want to give up eight years of income?
So why would you want to give up eight years of money from the Social Security Administration that you’re eligible for? The reason is simple.
Social Security benefits first become available once you turn 62. But for each year that you wait until the age of 70, those benefits are increased. And the increase is substantial. That’s because Social Security designed its formula so people who claim benefits at a young age get more checks, but every one is smaller. On the other hand, people who delay get much larger checks later in life. The typical senior with an average benefit could end up with close to $900 more per month by giving up their checks from age 62 to age 70.
Getting a bigger monthly check can make a huge difference when it comes to your ability to make ends meet later in life when your savings is often starting to dwindle. But that’s not the only benefit of putting off your Social Security claim. Odds are good that you will end up with more lifetime income as well as more monthly income by delaying your claim.
Waiting gives you the best chance at more lifetime benefits, because the benefits formula was designed to equalize out the money obtained by early and late filers — but it was created back when life expectancies were lower. Since people are living longer now, you could end up getting so many larger checks once you claim them at 70 that you more than make up for the eight years of money you missed out on.
Making your check bigger by delaying the start of your payments until age 70 also helps your spouse if you were the higher earner and you pass away first. Your spouse will end up better off because Social Security survivor benefits enable your widow(er) to keep the larger of the two payments coming into your household. If you’ve given up eight years of Social Security to maximize your monthly payment, your partner will get to keep the much larger check you earned after you’re gone.
How can you decide if a delayed benefits claim is right for you?
As you can see, there are three good reasons to delay Social Security: A larger monthly benefit, a better chance of maximizing lifetime income, and an improved ability to take care of a lower-earning spouse.
But there are also some downsides — most obviously the fact that you will miss out on a lot of payments that you could’ve received, and you will have to figure out some way to support yourself without Social Security until you are 70.
But unless you are unmarried and have health issues, or unless you are a lower-earning spouse who is claiming early to enable a higher-earning spouse to wait, the upsides of delaying your benefits claim may be far greater than the disadvantages, and a delayed start to your Social Security benefits may just be your best move.
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