When it comes to signing up for Social Security, you have choices. You’re allowed to file for benefits as early as age 62. But you’re not entitled to your complete monthly benefit based on your personal wage history until full retirement age (FRA) arrives. That age is 66, 67, or somewhere in between, depending on when you were born.
If you claim Social Security ahead of FRA, you’ll face a permanently reduced monthly benefit that could leave you to struggle financially as a retiree. On the other hand, if you delay your Social Security filing past FRA, you’ll boost your monthly benefit substantially. In fact, for each year you hold off beyond FRA, up until age 70, that monthly benefit gets a permanent 8% increase.
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Now once you turn 70, there’s no financial incentive to wait on Social Security. So 70 is usually considered the latest age to file for Social Security, even though seniors aren’t forced to take benefits at that age.
You may be inclined to claim Social Security at 70 so you can lock in the highest monthly benefit you’re eligible for. But that decision might backfire on you for a couple of reasons.
1. You might lose out on lifetime income
Filing for Social Security at age 70 will mean getting more money on a monthly basis. However, it won’t necessarily mean getting more money on a lifetime basis. If your health is poor and you don’t end up living until such a late age, you might end up shorting yourself big time.
Let’s say the monthly benefit you’re entitled to at your FRA of 67 is $1,800. If you sign up for Social Security at age 70 instead, you’ll boost those monthly payments to $2,232. But you’ll need to live until 82 1/2 to make up financially for those three years of missed benefits. At that age, you’ll have a total of $334,800 from Social Security, whether your filing age is 67 or 70.
What if you don’t live until 82 1/2, though? If you pass away at age 79, a Social Security filing at age 70 will, in this example, leave you with a little more than $18,000 less lifetime income than a filing at age 67.
2. You might miss out on the change to achieve your goals
Maybe you’ve always dreamed of traveling throughout Europe or South America, but your busy work schedule held you back. If your goal is to travel as a retiree or do something comparable that requires a degree of good health, waiting on Social Security could mean losing out on the chance to meet your goals while your body is in the right shape to handle them.
Let’s say one of your dream trips has you hiking the Andes. You may be healthy enough to handle that trip at age 67. But what if you decide to delay your Social Security claim until age 70, and you can’t afford that trip until you start getting your benefits? If, come age 70, your health has declined, you might never get to take that trip in your lifetime.
There are plenty of good reasons to consider claiming Social Security at age 70. But before you commit to that route, think about the drawbacks as well. You may come to the realization that while a boosted monthly benefit is a nice thing to have, it’s not worth the risks and drawbacks involved.