Key Points
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Even though taking benefits at 70 boosts them monthly, you might get less Social Security in your lifetime.
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You may need your benefits sooner to avoid damage to your nest egg.
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Waiting to get that money could mean missing out on experiences you deserve to enjoy.
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One of the toughest retirement-related decisions you might have to make is figuring out when to file for Social Security. You’re entitled to your monthly benefits at any time once you turn 62. But if you want those benefits without a reduction, you’ll need to wait for full retirement age to arrive, which is 67 if you were born in or after 1960.
You can also delay your Social Security claim past full retirement age to receive larger checks. Each month you hold off beyond that point earns you delayed retirement credits.
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Those credits are worth 8% per year you wait, and you can accumulate them until you turn 70. If your full retirement age is 67, filing for Social Security at 70 results in a 24% boost.
That doesn’t automatically mean 70 is your optimal filing age, though. Here are a few reasons to claim Social Security sooner, even if it means your monthly benefits will be smaller.
1. You may not live long enough to come out ahead
While delaying Social Security until age 70 is guaranteed to give you larger monthly benefits, it’s not guaranteed to give you a larger lifetime payout. Whether that happens depends on how long you end up living, which you can’t predict.
Case in point: Say you’re entitled to $2,000 in Social Security at age 67, but you wait until age 70 to file instead. Suddenly, your monthly checks are worth $2,480 apiece. Great. But if you pass away at 80, your lifetime total will be $312,000 if you file at full retirement age versus $297,600 if you file at 70.
In other words, in this example, waiting until 70 to claim Social Security costs you $14,400 in your lifetime. The numbers could, of course, look very different if you live until age 87 or 88. But since you don’t know how long you’ll live, recognize that delaying Social Security until 70 means taking a chance that you’ll end up with less money in total. If you’re not comfortable with that, you may want to file earlier.
2. Filing earlier could help preserve your nest egg
Unless you’re planning to work full-time until you turn 70, if you aim to delay Social Security until 70, you’ll need a way to cover your expenses in the interim. And while you could tap your savings, think about what might happen if there’s a major market downturn during that time.
You may not have enough cash to avoid selling assets in your retirement account at a loss if you’ve stopped working and need your savings to last for three years or more until Social Security starts. In a situation like that, filing for benefits sooner could help you avoid a massive hit in your IRA or 401(k).
Remember, when you take losses in a retirement account, you give up the opportunity to recover. Over time, that could put you at risk of running out of savings, which is a good reason to take benefits earlier than 70 if you need to.
3. Waiting could mean missing out on opportunities
You might think that if you’re in great shape once full retirement age arrives, you’ll continue to be in the same shape at age 70. But a lot can happen in that time. Chronic conditions can flare up or come to light, and mobility can start to wane.
If you have experiences you’ve earmarked your Social Security benefits for, waiting to claim them could mean missing out on the things you’ve always wanted to do. So if you have a decent amount of savings and can cover your costs easily with retirement plan withdrawals and your full retirement age benefit, you may want to claim Social Security sooner rather than wait until 70.
There’s clearly a big advantage to filing for Social Security at 70. Larger checks for life might give you more peace of mind, not to mention make your annual cost-of-living adjustments more valuable. But there are also plenty of good reasons not to claim Social Security at 70, so don’t assume you’re making a mistake if you decide to take benefits sooner.
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