The Best Reason to Take Social Security Long Before Age 70 | Smart Change: Personal Finance

(Maurie Backman)

One of the toughest decisions to make as you prepare for retirement is deciding when to claim Social Security. You can apply for benefits from the age of 62. But you won’t be entitled to your full monthly benefit based on your personal income history until you reach full retirement age (FRA). And that age is 66, 67 or somewhere in the middle, depending on the year you were born.

But you don’t have to sign up for benefits once you reach FRA. Instead, you can wait to file and collect deferred retirement credits that increase your benefits by 8% per year.

Once you turn 70, those credits don’t accrue any further, so 70 is generally considered the last age to apply for Social Security. And if you to do endure to age 70, you can extend your benefits in a very meaningful and beneficial way.

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But despite the benefit of claiming Social Security at age 70, you may want to apply for benefits much earlier. This can result in less money on a monthly basis, but not necessarily on a lifetime basis.

A risk you may not want to take

Delaying Social Security until age 70 generally pays off financially when you expect to live a long life. But if you don’t, it generally makes more financial sense to claim benefits earlier.

Remember that filing early can mean you get less money from Social Security each month. But it can also mean getting more out of Social Security during your lifetime.

Let’s say you are looking for a monthly benefit of $1,700 at an FRA of 67. If you apply for Social Security at age 62, you reduce that benefit to $1,190, while if you wait until age 70 , you increase it to $2,108.

If you end up living a long life, you’ll get more out of Social Security in total by postponing your application until age 70. But what if that doesn’t happen? What if you eventually die at age 75? In that case, here’s the total lifetime benefit you’re looking at based on your filing age:

  • Age 62 — $185,640
  • Age 67 — $163,200
  • Age 70 — $126,480

And that’s exactly why it might pay to claim Social Security well before age 70. While you may be short of benefits in the event of a longer life, you cannot say for sure that this will happen. So submitting early can ultimately give you peace of mind.

All of this, of course, assumes that you are single and only consider your own needs when deciding when to call on Social Security. If you’re married, it’s easy to argue for deferring your application to give your spouse a larger survivor benefit if he outlives you for many years.

But otherwise, don’t fixate on just the amount of monthly income you’re looking at when you hit Social Security age. Instead, consider the lifetime income. If you do, you may realize that filing well before age 70 really is the smartest and safest bet.

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