Key Points
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You have the choice to claim Social Security between the ages of 62 and age 70.
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The age at which you make your claim will affect the amount of benefits you collect.
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If you wait to claim your Social Security benefits, you’ll increase the amount you can collect.
When you turn 62, you become eligible for Social Security retirement benefits. Many people look forward to this day because getting benefits can open up the door to retirement. However, many financial experts will tell you not to claim Social Security as soon as you become eligible. In fact, the conventional wisdom is that you should wait until you turn 70.
Delaying for eight years when you could be collecting benefits is a major sacrifice. The big question is, is it worth making that sacrifice? And the answer is, it depends.
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Waiting to claim Social Security has significant benefits
When it comes to delaying Social Security, the advantages of waiting are very clear-cut. You can significantly increase the benefit you collect if you wait to claim it until you have reached age 70 and maxed out your delayed retirement credits.
Say, for example, that your full retirement age is 67. If you were scheduled to collect a $2,000 standard benefit at age 67, but you claimed it early instead, multiple years of early filing penalties would reduce your benefits to just $1,400 per month. Sure, you’d start collecting payments sooner, but you’d also be giving up $600 a month.
The math gets even more stark when you compare a claim at 62 to one at 70. Delaying increases your standard benefit by 24% if you wait until 70 compared to claiming at an FRA of 67, so you’d be able to take the $2,000 benefit and turn it into a $2,480 monthly payment.
That’s $1,080 extra every single month if you wait. Yes, you give up eight years of benefits. But if you live long enough, you’ll make up for that and still end up with more lifetime income. And for many people, collecting an extra $1,080 per month later in retirement when they may already be starting to see their 401(k) balance declining is well worth the sacrifice.
You stand the best chance of getting the most lifetime income, too
Delaying your Social Security claim may be worth the sacrifice not just to bring in more money each month, but because you can potentially bring in more money over the course of your lifetime.
The National Bureau of Economic Research reported that 90% of workers age 45 to 62 should delay their claim until 70. Not claiming at an optimal time ends up coming at a cost of around $182,370 in lifetime discretionary spending. So, is an extra $182,370 worth waiting for? For many people, the answer is a clear yes.
If you’re miserable at your job and desperate to retire, have health issues and can’t work, or have been forced to retire and your retirement plan balances are declining too fast, then it may not be worth waiting to claim. For many people, though, the sacrifice is well worth making.
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