Delaying social security for a higher payout is overrated. Here’s why.
Delaying social security for a higher payout is overrated.  Here’s why.

Delaying social security for a higher payout is overrated. Here’s why.

Social security is a primary source of retirement income for many people, and for some it is the only source. You can start receiving Social benefits at the age of 62, or you can defer your benefits to 70 years, which will increase your monthly total. While it may sound like a good thing to defer your benefits until you reach the 70s, due to the increased benefits, it can also be overestimated. Here’s why.

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It does not pay to wait

The size of your social security benefit at retirement depends to a large extent on your retirement age. Social security bases this benefit on your full retirement age, which can vary depending on your year of birth.

Year of birth Full retirement age
1943 to 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

Data source: Social Security Administration.

If you retire at your full retirement age in 2022, the maximum monthly benefit is $ 3,345; If you retire early at 62 it is $ 2,364; if you defer your benefits to 70, your maximum benefit will increase to $ 4,194. The leap in benefits of waiting until the age of 70 may seem significant, but it is a bit deceiving. Your checks will be larger, but you will receive far fewer of them than you would have by receiving benefits early or at your full retirement age. If your full retirement age is 67, there are 60 months between 62 and 67 and 96 months between 62 and 70 – that’s a good amount of missed checks.

Let’s say you were born in 1970 and are currently earning $ 80,000. Using Social Security’s benefit calculator, here’s the expected monthly salary and the total amount you would have received at certain ages:

Age you begin to receive benefits Monthly payment Total received with 80 Total received by 85
62 $ 1,605 $ 346,680 $ 442,980
67 $ 2,410 $ 375,960 $ 520,560
70 $ 3,075 $ 369,000 $ 553,500

Data source: Social Security Administration

Using these numbers, you can see that at age 80, a delay in your benefits to 70 would have resulted in fewer overall benefits than if you started at 70. At age 85, the total benefits may be more, but there is no way of knowing if someone will live long enough for the trade-off to make sense.

Make the most of your pension

Another important aspect here is being able to get the most out of yours retirement. You have no way of knowing when you will die, so deferring benefits for years can affect your quality of life in your early retirement years. Some new retirees may want to travel and embrace new passions and hobbies, and that will inevitably cost money.

Instead of pushing social security benefits back to 70, many will find it more rewarding to receive their benefits early – even with the lower monthly payout – so they can have the money to take on these newfound ventures and passions. You have worked hard and paid social security taxes your entire career; Give yourself a chance to reap these benefits as soon as you can.

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