The great thing about social security is that you are allowed to sign up for benefits at different ages. You can apply as early as age 62 or postpone your application until age 70. Technically, you can claim social security beyond the age of 70, but there is no financial incentive to wait to apply after that time.
Delays Social Security will result in a higher monthly benefit for life. If your full retirement age (OFF) is 67 and you decide to get stuck and claim benefits at age 70, you end up with a monthly payday that is 24% higher – for life.
As tempting as it may be, it does not always make sense to defer benefits. Before making the decision to defer claiming social security, answer a sober question.
Will I live long enough for the deferral of benefits to pay off?
For every year you endure claiming social security earlier FROM, your benefits will grow by 8%. This means you can achieve a maximum boost of 24% to 32% by filing at the age of 70, depending on your specific FRA.
While it can give you more money from Social Security on a monthly basis if you end up reporting, it will not necessarily give you more money on a lifetime basis. And that’s the last point you need to consider before signing up for the benefits late.
To see if it makes sense to delay your submission, determine your break-even point. This is the age at which you will have received the same total amount of income from social security based on filing with FRA, versus filing later.
If your FRA is 67 and you are eligible for a $ 1,600 monthly social security benefit at the time, but you postpone your application until age 70, your break-even age will be 82 1/2. At that age, you have raised a total of $ 297,600 from Social Security in both scenarios.
As such, if you think you want to live longer than 82 1/2, then it makes sense to delay your application. However, if you are not sure that will be the case, you may want to sign up for the benefits earlier.
In our example, if you were to live to the age of 80, you would get out $ 11,520 going forward in your life by signing up for Social Security at the age of 67, versus waiting until 70. On the other hand, waiting for 70 years leaves you $ 11,520 richer if you live up to 85 years.
What is the right call?
Without a crystal ball, there is no way of knowing how long you will live, so to some degree, postponing social security is always a bit of a game. However, if your health is strong in your 60s and you have a long family life history, you may want to consider postponing your application beyond FRA. On the other hand, if your health is poor, you may want to turn OFF or even earlier – maybe even as early as age 62.
Your ultimate goal should be to raise as much money from Social Security as you can in your life. Delaying your application may allow you to do so, but you will need to approach this decision with confidence. And if you’m not sure, archiving earlier may make more sense.