Many seniors rush to claim social security as early as possible, which means they apply at the age of 62. Doing so makes sense for some people, but it also means they settle for a reduced benefit for life.
On the other hand, it is possible to delay your archiving full retirement age (OFF), which is when you are entitled to your full monthly benefit based on your pay history. FRA kicks in at 66, 67 or somewhere in between. But for every year you delay your application beyond that time, until 70, your social security benefit gets a boost of 8%. This means that if you persevere until the age of 70, you can increase your benefits by 24% to 32% on a permanent basis.
Now let’s get one thing out of the way: Most seniors do does not wait until 70 to sign up Social Security. But here are a few reasons why you might want to consider delaying your application as long as possible.
1. You want to make up for a smaller nest egg
Maybe you had high goals of raising $ 1 million or more in savings in time for retirement. But if life and its many expenses got in the way of you, you may be worried about covering your living expenses now that you are approaching retirement and your nest egg is not as robust as you would have liked.
If that is the case, delay social security as long as possible can help you avoid the income shortage you would otherwise face. It can also give you more freedom during retirement to spend money on leisure without worry or guilt.
2. You want to leave your spouse with a more generous survivor benefit
If you die first, your spouse will be entitled to survivors’ benefits equal to 100% of the benefit you have been charged. And so the higher the benefit, the more generous an income stream your spouse will be queuing up to charge.
If you have a much younger spouse who was also on a much lower income, then it can help your spouse avoid a world of financial turmoil in your absence if you postpone your application for as long as possible. And it’s a really nice gift to leave.
3. You will have the motivation to keep working longer
Some people do not feel good about having a lot of downtime. If that describes you, then working longer is something worth considering. And if you commit to delaying your social security application, it can give you the boost you need to avoid retiring in your late 60s and joining 70 years instead.
Several studies have found that retirement increases the rate of depression because seniors accustomed to a structured schedule often struggle in its absence. Extending your time in the job market can help you avoid being affected by your mental health. And even though you could always claim social security from FRA and continue working beyond that time, you may be more likely to stay at your job longer if you decide to apply at 70.
Postponing social security until 70 is not something everyone can do. But if the opportunity exists in your world, it may pay to jump on it. You can end up benefiting from more than one way.